Press Release

DBRS Upgrades Ratings of the Notes Issued by 2018 Popolare Bari RMBS S.r.l.

RMBS
June 14, 2019

DBRS Ratings GmbH (DBRS) upgraded the following ratings on the notes issued by 2018 Popolare Bari RMBS S.r.l. (the Issuer):

-- Class A Notes upgraded to AA (high) (sf) from AA (sf)
-- Class B Notes upgraded to AA (low) (sf) from A (high) (sf)

The rating of the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in April 2059. The rating of the Class B Notes addresses the ultimate payment of interest and principal on or before the legal final maturity date.

The upgrades follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the April 2019 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining collateral pool.
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels.

2018 Popolare Bari RMBS S.r.l. is a securitisation of Italian first-lien residential mortgage loans originated and serviced by Banca Popolare di Bari S.c.p.A. and Cassa di Risparmio di Orvieto S.p.A. The transaction closed in June 2018, when the special-purpose vehicle (SPV) issued one class of floating-rate senior notes, one class of floating-rate mezzanine notes and two classes of floating-rate and additional return junior notes, namely Class A Notes, Class B Notes, Class J1 Notes and Class J2 Notes.

PORTFOLIO PERFORMANCE
As of April 2019, loans that were two-to-three-month arrears represented 0.19% of the outstanding portfolio balance, up from 0.18% in October 2018. The 90+ delinquency ratio was 0.29%, up from 0.21% in October 2018. No loans have defaulted so far.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions at 6.9% and 6.1%, respectively.

CREDIT ENHANCEMENT
As of the April 2019 payment date, credit enhancement to the Class A Notes was 18.9%, up from 15% as of the DBRS initial rating date. Credit enhancement to the Class B Notes was 12.1%, up from 9% as of the DBRS initial rating date Credit enhancement to the Class A Notes is provided by overcollateralisation of the outstanding collateral portfolio. The transaction benefits from an amortising liquidity reserve fund of EUR 19.5 million, which provides liquidity support to the rated notes. The reserve will be replenished up to an amount equal to 3% of the principal amount outstanding of the rated notes as of the preceding payment date, and it is floored at 1% of the rated notes initial amount.

The Account Bank is BNP Paribas Securities Services, Milan branch. Based on the private ratings of the account bank, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the rated notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

Six swap transactions are in place: four to hedge the basis risk, and two to hedge the fixed-floating interest rate risk. JP Morgan AG acts as swap counterparty. DBRS has given no credit to the swap transactions, as the swap documentation is not consistent with DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

The transaction structure was analysed in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings 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.

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/333487/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include servicer reports provided by Banca Popolare di Bari S.c.p.A., payment and investor reports provided by Securitisation Services S.p.A. and loan-by-loan level data from 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 purposes of providing these ratings to be of satisfactory quality.

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

This is the first rating action on this transaction since the initial rating date on 14 June 2018, when DBRS assigned ratings of AA (sf) and A (high) (sf) to the Class A Notes and Class B Notes.

The lead analyst responsibilities for this transaction have been transferred to Ettore Grassini.

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 6.9% and 6.1%, 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 instance, considering the Class A Notes, if the LGD increases by 50%, the rating of the Class A Notes would be expected to remain at AA (high) (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 AA (low) (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 AA (low) (sf).

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

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

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 GmbH are subject to EU and US regulations only.

Lead Analyst: Ettore Grassini, Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 14 June 2018

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main – Deutschland

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria 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 [email protected].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.