DBRS Downgrades Intesa Sanpaolo’s Senior Rating to BBB (high) after Sovereign Action; Stable Trend

DBRS Ratings Limited (DBRS) has today lowered Intesa Sanpaolo Spa’s (ISP or the Bank) Senior Long-Term Debt & Deposits rating to BBB (high) from A (low), with a Stable trend. Concurrently, the Bank’s Intrinsic Assessment (IA) was downgraded to BBB (high) from A (low). In parallel, DBRS confirmed the Bank’s Short-Term Debt and Deposits rating of R-1 (low) with Stable trend. Today’s rating action includes other liabilities as detailed in the table at the end of the press release.

The downgrade of Intesa Sanpaolo’s ratings is driven by DBRS’s rating action on the Republic of Italy. On January 13, 2017, DBRS downgraded the Republic of Italy’s Long-Term Foreign Currency - Issuer Rating and Long-Term Local Currency - Issuer Rating to BBB (high) from A (low), with a Stable trend. For more details on the rationale for the Sovereign downgrade, refer to the press release <a href="http://dbrs.com/research/304610/dbrs-downgrades-italy-to-bbb-high-stable-trend.html" target="_blank">“DBRS Downgrades Italy to BBB (high), Stable Trend - January 13, 2017”</a>.

ISP’s Senior Long-Term Debt & Deposits rating is positioned in line with the sovereign rating of Italy. DBRS continues to recognize the strengths of ISP’s position as the leading bank in Italy, with an adequate liquidity and capital position. However, given ISP’s high exposure to Italian sovereign bonds and concentration to the domestic banking market, DBRS considers that the Bank’s ratings are highly correlated with any changes made to the sovereign rating. The Stable trend is in line with the trend on DBRS’s Italian sovereign rating.

The ratings on ISP’s Cumulative Discretionary Pay Subordinated Debt and Mandatory Pay Subordinated Debt were downgraded to BBB from BBB (high), in line with the lowering of the IA, and remain Under Review with Negative Implications (URN) due to DBRS’s specific review on European subordinated debt. For more details on the rationale for the review, refer to the 13 January 2017 press release <a href="http://dbrs.com/research/304611" target="_blank">“DBRS Places Certain Sub Debt of 27 European Banking Groups Under Review With Negative Implications”</a>.

RATING DRIVERS
Upward rating pressure to ISP’s ratings would require an improvement of the rating for the Italian sovereign combined with a continuation of the Bank’s adequate financial profile. On the other hand, downward pressure would be driven by a further downgrade of the sovereign’s rating and/or a material deterioration in the Bank’s asset quality and capital position.

Notes:
All figures are in Euros unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (July 2016). Other applicable methodologies include the DBRS Criteria: Support Assessments for Banks and Banking Organisations (March 2016), DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (February 2016), Critical Obligations Rating Criteria (February 2016) and DBRS Criteria: Guarantees and Other Forms of Support (February 2016). These can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include company documents and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve month period. DBRS’s outlooks and ratings are under regular surveillance

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lead Analyst: Nicola De Caro, Vice President – Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: September 19, 2013
Most Recent Rating Update: November 11, 2016

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