DBRS Confirms Rating on Notes Issued by UBI SPV Group 2016 S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed the rating on the Class A Notes issued by UBI SPV Group 2016 S.r.l. (the Issuer) at A (low) (sf).

The rating action on the Class A Notes reflect an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the July 2017 payment date.
-- No revolving termination events have occurred;
-- Portfolio default rate, loss given default and expected loss assumptions for the remaining collateral portfolio.
-- Current available credit enhancement (CE) for the Class A Notes to cover the expected losses at the A (low) (sf) rating level.

UBI SPV Group 2016 S.r.l. is a securitisation of first-lien residential mortgage loans originated in Italy by Unione di Banche Italiane S.p.A. (UBI Banca) and several other Italian local banks, which have been incorporated into UBI Banca over the last year. UBI Banca undertook the role of Master Servicer. The transaction closed in August 2016 and envisages a three-year revolving period, during which UBI Banca may sell subsequent portfolios to the Issuer, subject to certain conditions and limitations.

PORTFOLIO PERFORMANCE
The portfolio is performing within DBRS’s expectations. As of the July 2017 payment date, the 90+ delinquency ratio has been stable over the year and it is currently at 0.60% of the performing collateral portfolio. The current cumulative default ratio (as a percentage of the original portfolio balance) stands at 0.64%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding pool and updated the probability of default (PD) and loss given default (LGD) assumptions on the outstanding collateral pool. At the A (low) (sf) rating level, the PD and LGD assumptions including the sovereign adjustment are 44.24% and 48.81%, respectively.

CREDIT ENHANCEMENT
The CE available to the Class A Notes has remained stable over the year. The current CE, consisting of the overcollateralisation provided by the collateral pool and the cash collateral set aside and not used to buy subsequent portfolios, stands at 24.76%. The transaction benefits of an amortising Cash Reserve which is available to cover senior fees and interest shortfall on the Class A Notes. The Cash Reserve is currently at its target level of EUR 83.4 million.

UBI Banca acts as Account Bank for the transaction. The Account Bank reference rating of A (low), being one notch below the DBRS public Long-Term Critical Obligations Rating of UBI Banca of “A”, complies with the Minimum Institution Rating, given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “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.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as the legal 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 on www.dbrs.com at: http://www.dbrs.com/about/methodologies

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

The sources of data and information used for this rating include servicer, payments and investors reports provided by UBI Banca and loan-by-loan data from the European DataWarehouse GmbH.

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

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

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

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

This is the first rating action since the Initial Rating Date.

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

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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 to the parameters used to determine the rating (the “Base Case”):

-- DBRS expected a Base Case probability of default (PD) and loss given default (LGD) for the portfolio based on a review of the current assets. 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 pool of mortgages for the Issuer are 22.29% and 36.52%, respectively. At the A (low) (sf) rating level, the corresponding PD is 44.24% and the LGD is 48.81%.
-- 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 of the Class A Notes would be expected to be downgraded to BB (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to be downgraded to BB (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to be downgraded to B (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD, expected rating of BBB (low) (sf)
-- 50% increase in PD, expected rating of BB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (sf)

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) 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 and US regulations only.

Lead Analyst: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director, Head of EU Structured Finance
Initial Rating Date: 11 August 2016

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor, London EC3M 3BY United Kingdom
Registered in England and Wales: No. 7139960

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

-- Unified Interest Rate Model for European Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda

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