DBRS Confirms Rating of the Notes Issued by UBI SPV Group 2016 S.r.l.

DBRS Ratings Limited (DBRS) confirmed its A (low) (sf) rating of the Class A Notes issued by UBI SPV Group 2016 S.r.l. (the Issuer).

The rating addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in October 2070.

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the July 2018 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the A (low) (sf) rating level.
-- No revolving termination events have occurred.

UBI SPV Group 2016 S.r.l. is a securitisation of first-lien residential mortgage loans originated in Italy by Unione di Banche Italiane S.p.A. (UBI Banca) and several other Italian local banks, which have been incorporated into UBI Banca over 2017. UBI Banca undertook the role of Master Servicer at the transaction closing and has replaced the acquired originators in their sub-servicing activities.

The transaction closed in August 2016 when UBI SPV Group 2016 S.r.l. issued a senior class of floating-rate notes and seven junior classes of additional return notes, namely the Class A Notes and Class B1-B7 Notes. The transaction includes a three-year revolving period, during which UBI Banca may sell subsequent portfolios to the Issuer, subject to certain conditions and limitations; the revolving period is scheduled to end in July 2019.

PORTFOLIO PERFORMANCE
As of June 2018, loans that were two- to three-month arrears represented 0.3% of the outstanding portfolio balance, down from 0.4% in June 2017. The 90+ delinquency ratio was 1.4%, up from 0.6% in June 2017. The cumulative default ratio was 1.4%, up from 0.6% in June 2017.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and, given that the transaction is still within its revolving period, maintained its base case PD and LGD assumptions at 22.3% and 36.5%, respectively, based on a worst-case portfolio composition as per the replenishment criteria set forth in the transaction legal documents.

CREDIT ENHANCEMENT
The credit enhancement available to the Class A Notes has remained stable at 24.8% over the past year. The current current credit enhancement consists of the overcollateralisation provided by the outstanding collateral portfolio and the cash collateral set aside and not used to buy subsequent portfolios. The transaction benefits from an amortising cash reserve; the reserve, which is available to cover senior fees and interest shortfall on the Class A Notes, is currently at its target level of EUR 83.4 million.

UBI Banca acts as the account bank for the transaction. Based on the account bank reference rating of BBB (high), which is one notch below the DBRS Long-Term Critical Obligations Rating of UBI Banca of A (low), and the downgrade provisions outlined in the transaction documents, DBRS considers the risk arising from the exposure to the bank to be consistent with the rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology”. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for this rating include payment and investor reports provided by UBI Banca, and loan-level data provided by the European DataWarehouse GmbH.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purpose of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 28 July 2017, when DBRS confirmed its rating of the Class A Notes at A (low) (sf).

The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the “Base Case”):

-- DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer are 22.3% and 36.5%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to fall to BBB (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to BB (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to B (high) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD, expected rating of BBB (sf)
-- 50% increase in PD, expected rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)

For further information on DBRS historic 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 and US regulations only.

Lead Analyst: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 11 August 2016

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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Interest Rate Stresses for European Structured Finance Transactions

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.