OREANDA-NEWS. Fitch Ratings has assigned Intesa Sanpaolo S.p.A.'s (IntesaSP) USD1bn perpetual USD additional Tier 1 7.7% capital securities (ISIN: IT0005136251 Italian substitute tax exempt; IT0005136269 subject to Italian substitute tax) a final rating of 'BB-'.

The final rating is in line with the 'BB-(EXP)' expected rating Fitch assigned to the notes on 9 September 2015 (see "Fitch Rates Intesa Sanpaolo S.p.A.'s USD Additional tier 1 Capital Securities 'BB-(EXP)'" at www.fitchratings.com).

KEY RATING DRIVERS
The notes are rated five notches below IntesaSP's 'bbb+' Viability Rating (VR) - twice for loss severity relative to senior unsecured creditors and three times for incremental non-performance risk relative to IntesaSP's VR. The notching for non-performance risk reflects the instruments' fully discretionary interest payment. Under the terms of the notes, the issuer will not make an interest payment (in full or in part) if it has insufficient distributable items.

Fitch has assigned a 50% equity credit to the securities, reflecting the agency's view that the write-down on a breach of the 5.125% CET1 trigger is not so distant to the point of non-viability and limits the instrument's "going concern" characteristics. It also reflects the notes' full coupon flexibility, their permanent nature and the subordination to all senior creditors.

RATING SENSITIVITIES
The rating of the securities is sensitive to a change in the VR. The rating is also sensitive to a change in their notching, which could arise if Fitch changes its assessment of their non-performance relative to the risk captured in IntesaSP's VR. This could reflect a change in capital management or flexibility or an unexpected shift in regulatory buffers and requirements, for example.