Press Release

DBRS Assigns A (high) Ratings to Intesa Sanpaolo S.p.A. Covered Bonds Guaranteed by ISP OBG S.r.l. Series 32 and Series 33

Covered Bonds
February 21, 2019

DBRS Ratings Limited (DBRS) assigned A (high) ratings to Series 32 and Series 33 Obbligazioni Bancarie Garantite (OBG, the Italian legislative Covered Bonds) issued under the Intesa Sanpaolo S.p.A. (ISP or the Issuer) EUR 40 billion Covered Bonds Programme (ISP OBG or the Programme). The Programme is guaranteed by ISP OBG S.r.l.

Series 32 is a EUR 1.65 billion floating-rate bond linked to three-month Euribor + 0.69% that will mature in February 2024.

Series 33 is a EUR 1.65 billion floating-rate bond linked to three-month Euribor + 1.30% that will mature in May 2032.

Concurrently, DBRS confirmed its A (high) ratings on the other OBGs outstanding under the Programme and discontinued its ratings on Series 13 and Series 14, which repaid early on 14 February 2019. Including the newly issued series, there are 20 series outstanding for a total amount of EUR 30.53 billion.

The ratings reflect the following analytical considerations:

-- A Covered Bonds Attachment Point (CBAP) of “A”, which is the Long-Term Critical Obligations Rating of ISP. ISP is the Issuer and Reference Entity for the Programme. DBRS classifies the Republic of Italy (rated BBB (high) with a Stable trend by DBRS) as a jurisdiction in which covered bonds are a particularly important funding instrument and deems the cover pool (CP) strategic for the core activity of the Issuer.
-- A Legal and Structuring Framework (LSF) Assessment of “Adequate” assigned to the Programme.
-- An LSF-Implied Likelihood (LSF-L) of “A”.
-- A one-notch uplift for good recovery prospects.
-- The minimum overcollateralisation (OC) observed over the last four quarters is 19.6%. However, DBRS gives credit to a limited level equal to 8%, which is the level of OC that DBRS considers sustainable based on information from the Issuer and market developments. The Issuer commits to an asset percentage of 94.5%, which translates into an OC commitment of 5.82%.

The transaction was analysed with the DBRS European Covered Bonds Cash Flow tool. The main assumptions focused on the timing of defaults and recoveries of the assets and interest rate stresses.

Everything else being equal, a downgrade of the CBAP by one notch would lead to a downgrade of the LSF-L by one notch, resulting in a downgrade of the rating by one notch. In addition, the ratings of ISP OBG would be downgraded if the quality of the CP and the level of OC were no longer sufficient to support a one-notch uplift for good recovery prospects.

As of today, the total amount of covered bonds outstanding is EUR 30.53 billion. As of December 2018, the aggregate balance of the assets in the CP was EUR 36.5 billion, including EUR 31.7 billion of residential and commercial mortgages (defaulted loans not included), plus EUR 4.8 billion of cash collections (considering the principal component and reserve fund required amount), resulting in an OC of 19.6%.

As of December 2018, the CP comprised 416,000 loans with a 93.3% residential versus a 6.7% non-residential split, based on the type of property as defined in the Ministry of Finance Decree 12/2006 n.310. The CP has a weighted-average (WA) current loan-to-value ratio of 50.0% and a WA seasoning of 6.4 years. The mortgages have been originated by ISP and network banks that are part of the ISP group. The CP is geographically well distributed, with higher concentrations in the Italian regions of Lombardy (17.4% of the total outstanding balance), Veneto (15.0%) and Apulia (10.9%).

The CP comprised fixed-rate (58.9% of the total outstanding balance) and floating-rate loans (41.1% of the total outstanding balance). The floating-rate mortgage loans are indexed to different plain-vanilla bases and reset at different dates. This compares with 100.0% floating-rate liabilities linked to three-month Euribor plus a spread.

Part of the interest rate risk in the transaction is hedged with swaps with Intesa Sanpaolo S.p.A. and other banks of the group (Carisbo S.p.A, Banca CRF S.p.A.; Cassa di Risparmio del Veneto S.p.A. was incorporated into ISP as of July 2018 and Banco di Napoli S.p.A. that was incorporated into ISP as of November 2018) on their respective portfolios. Swap documentation embeds DBRS derivatives criteria and DBRS has taken swaps into account in its cash flow analysis.

All CP assets are denominated in euros, as are all OBG. As such, investors are not currently exposed to any foreign exchange risk.

As of December 2018, the WA life of the CP was 9.2 years, while the WA life of the OBG calculated as of today is 6.9 years, based on the expected maturity. This generates an asset/liability mismatch, which is mitigated by the 12-month maturity extension in case of an Issuer event of default and by the OC in place.

DBRS has assessed the LSF related to the ISP OBG as “Adequate” according to its rating methodology. For more information, please refer to the “Italian Obbligazioni Bancarie Garantite Legal and Structuring Framework” commentary available at

All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating European Covered Bonds.”

In DBRS opinion, the changes under consideration do not require the application of the entire principal methodology. Therefore, DBRS focused on the cash flow analysis.

A review of the transaction legal documents was limited to the documentation pertaining to the issuance of Series 32 and Series 33. All other transaction documents have remained unchanged since the most recent rating action.

In DBRS’s opinion, a discontinued-repaid rating action does not warrant the application of the entire principal methodology, as the bond has been repaid in full.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on at:

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:

The sources of data and information used for these ratings include static default data, investor reports and loan-by-loan data on the CP provided by the Issuer that allowed DBRS to further assess the portfolio.

DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS did not rely upon third-party due diligence in order to conduct its analysis. At the time of initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

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 18 December 2018, when DBRS assigned A (high) ratings to Series 31 issued under the ISP CB Programme.

Information regarding DBRS ratings, including definitions, policies and methodologies, is available on

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:

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

Lead Analyst: Alessandra Maggiora, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 7 November 2014

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The rating methodologies used in the analysis of this transaction can be found at:

-- Rating European Covered Bonds
-- Rating European Covered Bonds Addendum: Market Value Spreads
-- Global Methodology for Rating Banks and Banking Organisations
-- DBRS Criteria: Guarantees and Other Forms of Support
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating CLOs and CDOs of Large Corporate Credit
-- Rating CLOs Backed by Loans to European SMEs
-- Interest Rate Stresses for European Structured Finance Transactions
-- Rating Sovereign Governments

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at:

For more information on this credit or on this industry, visit or contact us at [email protected].