DBRS Ratings GmbH (DBRS Morningstar) assigned an A (high) rating to the Series 47 Obbligazioni Bancarie Garantite (OBG or the Italian legislative covered bonds) issued under the Intesa Sanpaolo SpA (ISP or the Issuer) EUR 55 billion Covered Bonds Programme (ISP OBG or the Programme). ISP OBG S.r.l. guarantees the Programme.
Series 47 is a EUR 10 million floating-rate bond linked to three-month Euribor plus a spread of 1.0% and will mature in August 2052. As with all other series issued under the Programme, Series 47 will benefit from a 12-month maturity extension.
All covered bonds issued under the Programme rank pari passu with each other and DBRS Morningstar currently rates them A (high).
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 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 Issuer’s core activity.
-- 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.
-- A level of overcollateralisation (OC) to which DBRS Morningstar gives credit of 11.3%. It is the minimum OC observed over the past 12 months adjusted by a scaling factor of 0.9. The Issuer commits to an Asset Percentage of 94.5%, which translates into an OC commitment of 5.82%.
-- DBRS Morningstar’s sovereign rating of BBB (high) with a Stable trend on the Republic of Italy , by, as of the date of this press release.
DBRS Morningstar analysed the transaction with its European Covered Bonds Cash Flow tool. The main assumptions focused on the timing of defaults, recoveries of the assets, and interest rate stresses.
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 bond ratings. In addition, DBRS Morningstar would downgrade the ratings on the ISP OBG 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 June 2022, the CP comprises fixed-rate (71.2% of the total outstanding balance) and floating-rate (28.8%) loans. 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 exposed to interest rate risk, as since February 2020 the transaction does not have any swap contracts in place.
For further information on the Programme, please refer to the rating report at www.dbrsmorningstar.com.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
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 at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (17 May 2022).
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is: “Rating and Monitoring Covered Bonds” (22 April 2022).
Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.
In DBRS Morningstar’s opinion, the changes under consideration do not require the application of the entire principal methodology. Therefore, DBRS Morningstar focused on the cash flow analysis.
A review of the transaction legal documents was limited to the documentation pertaining to the issuance of Series 47. All other transaction 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: https://www.dbrsmorningstar.com/research/401817/global-methodology-for-rating-sovereign-governments.
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: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.
The sources of data and information used for these ratings include investor reports and CP stratification tables provided by the Issuer as of 30 June 2022.
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
At the time the of the initial rating, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.
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 5 November 2021, when DBRS Morningstar confirmed its A (high) ratings on the Programme following the annual review.
Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.
For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.
This rating is 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: 7 November 2014
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrsmorningstar.com/about/methodologies.
-- Rating and Monitoring Covered Bonds (22 April 2022), https://www.dbrsmorningstar.com/research/395642/rating-and-monitoring-covered-bonds.
-- Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (22 April 2022), https://www.dbrsmorningstar.com/research/395643/rating-and-monitoring-covered-bonds-addendum-market-value-spreads.
-- Global Methodology for Rating Banks and Banking Organisations (23 June 2022), https://www.dbrsmorningstar.com/research/398692/global-methodology-for-rating-banks-and-banking-organisations.
-- Legal Criteria for European Structured Finance Transactions (22 July 2022), https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022), https://www.dbrsmorningstar.com/research/402943/interest-rate-stresses-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2022), https://www.dbrsmorningstar.com/research/402773/operational-risk-assessment-for-european-structured-finance-originators.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022), https://www.dbrsmorningstar.com/research/402774/operational-risk-assessment-for-european-structured-finance-servicers.
-- European RMBS Insight Methodology (28 March 2022) and European RMBS Insight Model v18.104.22.168, https://www.dbrsmorningstar.com/research/394309/european-rmbs-insight-methodology.
-- European RMBS Insight: Italian Addendum (10 December 2021), https://www.dbrsmorningstar.com/research/389473/european-rmbs-insight-italian-addendum.
-- Rating CLOs and CDOs of Large Corporate Credit (26 January 2022), https://www.dbrsmorningstar.com/research/391226/rating-clos-and-cdos-of-large-corporate-credit.
-- Rating CLOs Backed by Loans to European SMEs (10 June 2022) and DBRS Diversity Model v22.214.171.124, https://www.dbrsmorningstar.com/research/398252/rating-clos-backed-by-loans-to-european-smes.
-- Global Methodology for Rating Sovereign Governments (29 August 2022), https://www.dbrsmorningstar.com/research/401817/global-methodology-for-rating-sovereign-governments.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022), https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrsmorningstar.com/research/278375.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at email@example.com.