DBRS Confirms Ratings on 2013 Popolare Bari RMBS S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed the ratings on the following Notes issued by 2013 Popolare Bari RMBS S.r.l. (the Issuer):

-- €204,855,268.75 Class A1 Notes confirmed at AA (high) (sf)
-- €62,936,550.63 Class A2 Notes confirmed at AA (high) (sf)

The confirmation of the ratings of the Class A1 and A2 Notes (Class A Notes) is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the December payment 2015.
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Incorporation of a sovereign-related stress component to address the impact of macroeconomic variables on collateral performance given the long-term foreign and local currency rating of A (low) for the Republic of Italy.
-- Current available credit enhancement for the Class A Notes to cover the expected losses at the AA (high) (sf) rating level.

The transaction is a cash flow securitisation collateralised by a portfolio of first lien residential mortgage loans originated by Banca Popolare di Bari S.C.p.A. (BPB) and Cassa di Risparmio di Orvieto S.p.A. (CRO; and collectively the Originators and Servicers), which are part of the Banco Popolare di Bari Group.

The transaction is performing within DBRS’s expectations. The cumulative gross default ratio is currently 0.51% of the original balance. The 90+ delinquency ratio as a percentage of the performing balance of the portfolio has increased to 2.17% as of the December 2015 payment date, up from 1.30% as of the December 2014 payment date.

The credit enhancement has increased considerably over the year as a result of the deleveraging of the Class A Notes, currently at 36.47%. Credit enhancement to the Class A Notes is provided by subordination of the Class B1 and B2 Notes and a non-amortising reserve fund of EUR 15.59 million. The reserve fund is available to cover any interest shortfalls on senior fees and interest on the Class A Notes and is currently at the target level of EUR 15.59 million.

The Bank of New York Mellon (Luxembourg) S.A., Italian branch is the Transaction Bank for this transaction. The AA (low) DBRS public rating of The Bank of New York Mellon (Luxembourg) S.A., Italian branch is at least equal to the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions. In addition, J.P. Morgan Securitites plc is the hedging counterparty for this transaction. The DBRS private rating of J.P. Morgan Securitites plc complies with the current DBRS Derivative Criteria for European Structured Finance Transactions.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable 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. DBRS conducted a review of the amendments to the servicing agreement executed on 11 February 2016. The other transaction legal documents have remained unchanged since the most recent rating action, and were not reviewed.

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

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include investor reports provided by Securitisation Services S.p.A. and data from the European DataWarehouse GmbH.

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

DBRS was not supplied with third-party assessments; however, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 1 April 2015, when DBRS confirmed the rating on the Class A Notes at AA (high) (sf).

The lead responsibilities for this transaction have been transferred to Antonio Di Marco.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on 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 probability of default (PD) and LGD for the pool based on a review of the current receivables. 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 mortgages for the Issuer are 9.93% and 11.93%, respectively. At the AA (high) (sf) rating level, the corresponding PD is 32.85% and the LGD is 33.80%.
-- DBRS assumed that the time of recovery lag was 60 months and also tested an additional scenario with 84 months of recovery lag based on the low level of recovery reported by the originators on the repossession data and information provided.
-- 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 example, if the LGD increases by 50%, the rating on 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 on the Class A Notes would be expected to remain at AA (high) (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating on the Class A Notes would be expected to fall to AA (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 (high) (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 (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Davide Nesa, Senior Financial Analyst
Initial Rating Date: 10 April 2014
Initial Rating Committee Chair: Claire Mezzanotte, Group Managing Director

Lead Surveillance Analyst: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Mary Jane Potthoff, Managing Director

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The rating methodologies and criteria used in the analysis of this transaction can be found at http://www.dbrs.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (February 2016)
-- Master European Structured Finance Surveillance Methodology (December 2015)
-- Operational Risk Assessment for European Structured Finance Servicers (December 2015)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (January 2016)
-- Unified Interest Rate Model for European Securitisations (October 2015)
-- Derivative Criteria for European Structured Finance Transactions (February 2016)

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.