Press Release

DBRS Morningstar Downgrades Credit Ratings on Unione di Banche Italiane S.p.A. Covered Bonds (OBG - Mortgages - Programme 1) to AA (low)

Covered Bonds
September 14, 2023

DBRS Ratings GmbH (DBRS Morningstar) downgraded its credit ratings on the Obbligazioni Bancarie Garantite (OBG; the Italian legislative covered bonds) issued under the Unione di Banche Italiane S.p.A. Covered Bonds Programme 1 (UBI OBG1 or the Programme) to AA (low) from AA. This rating action follows the completion of a full review of the Programme.

This rating action is driven by the interest rate increase that has occurred since the last review, which affects the projected liquidation value of the fixed-rate portion of the cover pool (CP) following the assumed default of the reference entity (RE).

Concurrently, DBRS Morningstar discontinued its credit ratings on Series 18 (ISIN IT0005140030), tranche 1, 2 and 3, which were repaid in January 2023.

As of today, the series of OBG outstanding under the Programme, guaranteed by UBI Finance S.r.l., amounted to EUR 6.4 billion.

The credit ratings are based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of “A”, which is the Long Term Critical Obligations Rating of Intesa Sanpaolo S.p.A. (Intesa). Intesa is the Issuer and RE for the Programme. DBRS Morningstar considers the Republic of Italy as a jurisdiction in which covered bonds (CBs) are a particularly important funding instrument and deems the CP strategic for the Issuer’s core activity.
-- A Legal and Structuring Framework (LSF) Assessment of “Adequate” associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of BBB (low), which is the lowest in line with the assigned LSF-Implied Likelihood (LSF-L).
-- An LSF-L of A (high).
-- A one-notch uplift for good recovery prospects.
-- A level of overcollateralisation (OC) of 14.5% to which DBRS Morningstar gives credit, which is the minimum level observed in the last 12 months adjusted by a scaling factor of 0.85, and a committed OC of 13%.
-- The sovereign rating on the Republic of Italy, rated BBB (high) with a Stable trend by DBRS Morningstar, as of the date of this rating action.

DBRS Morningstar analysed the transaction with its DBRS Morningstar European Covered Bond Cash Flow tool. The main assumptions focused on the timing of defaults and recoveries of the assets, interest rate stresses, and market value spreads to calculate liquidation values on the CP.

Everything else 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 covered bonds ratings.

In addition, all else unchanged, the OBG credit ratings would be downgraded if any of the following occurred: (1) the CPCA were downgraded below BBB (low); (2) the quality of the CP and level of OC were no longer sufficient to support a one-notch uplift for good recovery prospects; (3) the relative amortisation profile of the OBG and CP moved adversely; or (4) volatility in the financial markets caused the currently estimated market value spreads to increase.

Intesa acts as the account bank, which also holds the reserve account. Based on the credit ratings on Intesa and on the account bank’s replacement provisions included in the documentation, DBRS Morningstar considers the risk of such counterparty to be consistent with the ratings assigned, in accordance with its “Legal Criteria for European Structured Finance Transactions” methodology.

The total outstanding amount of OBG is EUR 6.4 billion while the aggregate balance of the CP, considering data as at 31 July 2023, was EUR 7.8 billion of residential mortgages plus EUR 810 million of cash collections, resulting in a total OC of 32.7%.

As at July 2023, the CP comprised 112,109 first-ranking residential mortgages, mainly originated by network banks of the Unione di Banche Italiane S.p.A. group.

The weighted-average (WA) indexed current loan-to-value ratio of the mortgages was 46.3% with a seasoning of 10.4 years. The CP was mainly distributed in the Italian regions of Lombardy (36.7% by outstanding balance) and Lazio (17.2%).

The CP comprised fixed-rate loans (46.9%) and floating-rate loans (53.1%), the former of which includes mixed loans as well as optional loans currently featuring a fixed-rate coupon. The floating-rate mortgage loans are indexed to different plain-vanilla bases and reset at different dates.

In comparison, 96.9% of the liabilities pay a fixed rate and 3.1% pay a floating rate linked to three-month Euribor. The resulting interest and basis risks are unhedged. DBRS Morningstar considered this in its cash flow analysis.

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

The WA life (WAL) of the CP is 8.8 years whereas currently the WAL of the OBG is 2.8 years. The resulting asset-liability maturity mismatch is mitigated by the 12-month maturity extension in case of an Issuer event of default and by the OC.

DBRS Morningstar assessed the LSF related to the UBI OBG1 as “Adequate”, according to its rating methodology. For more information, please refer to the DBRS Morningstar commentary “Italian Obbligazioni Bancarie Garantite Legal and Structuring Framework” available at

DBRS Morningstar’s credit ratings on the outstanding CB series address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related interest payment amounts and the related principal amount.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

Credit rating actions on the Issuer are likely to have an impact on these credit ratings. There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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 (4 July 2023),

All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: Global Methodology for Rating and Monitoring Covered Bonds (8 May 2023),

Other methodologies referenced in this transaction are listed at the end of this press release.

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 focused on the appointment of Intrum Italy S.p.A. as sub-servicer (November 2022).

For a more detailed discussion of the sovereign risk impact on Structured Finance credit 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 credit ratings include historical performance data (static pool default and prepayments data from 2013 to 2023) as well as loan-level and stratification information on the CP as of 30 June 2023 provided by the Issuer.

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

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

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

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

The last credit rating action on this transaction took place on 14 September 2022, when DBRS Morningstar confirmed its AA ratings on the CB series outstanding under the Programme.

Information regarding DBRS Morningstar credit 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: For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Antonio Laudani, Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 24 August 2015

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Geschäftsführer: Detlef Scholz
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The credit rating methodologies used in the analysis of this transaction can be found at:

-- Global Methodology for Rating and Monitoring Covered Bonds (8 May 2023),
-- Global Methodology for Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (8 May 2023),
-- European RMBS Insight Methodology (27 March 2023) and European RMBS Insight model v,
-- European RMBS Insight: Italian Addendum (29 September 2022),
-- Global Methodology for Rating Banks and Banking Organisations (22 June 2023),
-- Legal Criteria for European Structured Finance Transactions (30 June 2023),
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022),
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022),
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2022),
-- Global Methodology for Rating Sovereign Governments (29 August 2022),
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (4 July 2023),

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