Press Release

DBRS Morningstar Confirms A (high) Ratings of Intesa Sanpaolo S.p.A. Covered Bonds Guaranteed by ISP OBG S.r.l.

Covered Bonds
November 06, 2020

DBRS Ratings GmbH (DBRS Morningstar) confirmed its A (high) ratings of the Obbligazioni Bancarie Garantite (OBG, or the Italian legislative covered bonds) issued under the Intesa Sanpaolo S.p.A. (ISP, or the Issuer) EUR 50 billion covered bond programme (ISP OBG, or the Programme) guaranteed by ISP OBG S.r.l. The action follows the completion of the annual review of the Programme.

The A (high) ratings assigned to ISP OBG reflect the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of “A”, which is the Long Term Critical Obligations rating (LT-COR) of ISP. ISP is the Issuer and Reference Entity (RE) for the Programme. DBRS Morningstar classifies the Republic of Italy (rated BBB (high) with a Negative trend by DBRS Morningstar) 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 16.25%. However, DBRS Morningstar gives credit to a limited level equal to 8%, which is the level of OC that DBRS Morningstar 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 Morningstar European Covered Bond 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 CB ratings 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.

There are currently 28 series outstanding for a total amount of EUR 46.1 billion. As of September 2020, the aggregate balance of the assets in the CP was EUR 53.7 billion, comprising EUR 46.1 billion of residential and commercial mortgages (defaulted loans included), and EUR 7.6 billion of cash collections (considering principal component and reserve fund required amount), resulting in an estimated OC of 16.25%.

As of September 2020, the CP comprised 575,201 loans with a 91.7% residential versus an 8.3% 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) indexed current loan-to-value ratio of 50.9% and a WA seasoning of 6.3 years. The mortgages were originated by ISP and network banks that are part of the ISP group. The CP is geographically diversified, with the highest concentrations in the Italian regions of Lombardy (20.4% by outstanding loan balance), Veneto (14.4%), and Apulia (9.4%).

The CP comprised fixed-rate (67.1% of the total outstanding balance) and floating-rate loans (32.9% 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. The transaction is now exposed to interest rate risk, as ISP and the other originators unwound the swap contracts in place on 25 February 2020.

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 September 2020, the WA life of the CP was 9.2 years, while the WA life of the OBG calculated as of today is 8.5 years, based on the expected maturity. This generates an asset/liability mismatch, which is partially mitigated by the 12-month maturity extension in case of an Issuer event of default and by the OC in place. DBRS Morningstar 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

On 2 November 2020, DBRS Morningstar published a Request for Comments on the “European RMBS Insight: Italian Addendum”. If the proposed methodology addendum was adopted without any changes, to replace the “Master European Residential Mortgage-Backed Securities Rating Methodology: Italian Addendum” no rating impact is expected on the ratings of ISP OBG.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may increase in the coming months for many residential mortgage portfolios, some meaningfully. The ratings are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar assumed a moderate decline in residential property prices.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were last updated on 10 September 2020. For details, see the following commentaries: and The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 5 May 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect the ratings of DBRS Morningstar-rated RMBS transactions in Europe. For more details please see For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please
see the following DBRS Morningstar press release:

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at:

All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating and Monitoring Covered Bonds.” (27 April 2020).

DBRS Morningstar 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 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 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 “Global Methodology for Rating Sovereign Governments” 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 Morningstar to further assess the portfolio.

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

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

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

DBRS Morningstar 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 24 June 2020, when DBRS Morningstar assigned A (high) ratings to Series 43 and Series 44 of ISP OBG.

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

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

Ratings assigned by DBRS Ratings GmbH are subject to EU and U.S. regulations only.

Lead Analyst: Antonio Laudani, Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 7 November 2014

DBRS Ratings GmbH, Sucursal en España
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28006 Madrid
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of this transaction can be found at:
-- Rating and Monitoring Covered Bonds (27 April 2020),
-- Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (27 April 2020),
-- Global Methodology for Rating Banks and Banking Organisations (8 June 2020),
-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (21 September 2020) and European RMBS Credit Model v,
-- Operational Risk Assessment for European Structured Finance Originators (30 September 2020),
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020),
-- Rating CLOs and CDOs of Large Corporate Credit (21 July 2020),
-- Rating CLOs Backed by Loans to European SMEs (30 September 2020) and DBRS Diversity Model v2.4,
-- Interest Rate Stresses for European Structured Finance Transactions (28 September 2020),
-- Global Methodology for Rating Sovereign Governments (27 July 2020),

A description of how DBRS Morningstar 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

This press release was modified on 7 December 2020 to correct a disclosure note that listed the wrong DBRS Morningstar legal entity.