Press Release

DBRS Morningstar Confirms A (high) Ratings on Intesa Sanpaolo S.p.A. Covered Bonds (OBG - Mortgages - Programme 2) Guaranteed by ISP OBG S.r.l.

Covered Bonds
November 05, 2021

DBRS Ratings GmbH (DBRS Morningstar) confirmed its A (high) ratings on 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 reflect the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of “A”, which is ISP’s Long Term Critical Obligations rating. ISP is the Issuer and Reference Entity (RE) for the Programme. DBRS Morningstar classifies the Republic of Italy (rated BBB (high) with a Stable 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 14.7%. 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 to an OC commitment of 5.82%.

DBRS Morningstar analysed the transaction with its 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 one-notch downgrade of the CBAP would lead to a one-notch downgrade of the LSF-L, resulting in a one-notch downgrade of the CB ratings. In addition, the ratings on the 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 45.85 billion. As of June 2021, the aggregate balance of the assets in the CP was EUR 52.6 billion, comprising EUR 46.7 billion of residential and commercial mortgages (defaulted loans included) and EUR 5.9 billion of cash collections (considering principal component and reserve fund required amount), resulting in an estimated OC of 14.7%.

As of June 2021, the CP comprised 576,980 loans with a split of 91.4% residential versus 8.6% nonresidential, 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 50.75% and a WA seasoning of 6.5 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 (20.8% by outstanding loan balance), Veneto (13.8%), and Lazio (9.7%).

The CP comprised fixed-rate (68.95% of the total outstanding balance) and floating-rate loans (31.05% 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 June 2021, the WA life of the CP was 9.2 years while the WA life of the OBG calculated as of the date of this press release is 8.4 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 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 13 October 2021, DBRS Morningstar published a request for comments on the “European RMBS Insight: Italian Addendum”. If the proposed methodology addendum is adopted without any changes to replace the current one, no rating impact is expected on the ratings on the ISP OBG.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an immediate economic contraction, leading in some cases to increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many CPs. The ratings are based on additional analysis 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 8 September 2021. DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced report. For details, see the following commentaries: and

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at

All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating and Monitoring Covered Bonds” (10 June 2021).

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

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.

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at:

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report:

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 as of 30 June 2021 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 20 January 2021, when DBRS Morningstar assigned A (high) ratings to Series 45 and Series 46 of the ISP OBG. Previously, on 6 November 2020, DBRS Morningstar confirmed its ratings on all outstanding series of notes.

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: DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage:

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Antonio Laudani, 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 and Monitoring Covered Bonds (10 June 2021),
-- Rating and Monitoring Covered Bonds Addendum: Market Value Spreads 10 June 2021),
-- Global Methodology for Rating Banks and Banking Organisations (19 July 2021),
-- Legal Criteria for European Structured Finance Transactions (29 July 2021),
-- European RMBS Insight Methodology (3 June 2021) and European RMBS Insight Model v5.3.0.1,
-- European RMBS Insight: Italian Addendum (21 December 2020),
-- Operational Risk Assessment for European Structured Finance Originators (16 September 2021),
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021),
-- Rating CLOs and CDOs of Large Corporate Credit (8 February 2021),
-- Rating CLOs Backed by Loans to European SMEs (28 June 2021) and DBRS Morningstar Diversity Model v2.5.0.0,
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021),
-- Global Methodology for Rating Sovereign Governments (9 July 2021),
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (3 February 2021),

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