DBRS Assigns Ratings to Banco Popular Español Cedulas Hipotecarias

DBRS Ratings Limited (DBRS) has today assigned a rating of ‘A’ to the cedulas hipotecarias (CH) issued by Banco Popular Español (BPE) Covered Bond Programme.

The rating reflects the following analytical considerations:

• The senior unsecured debt rating of BPE (the “Issuer”) of ‘A’ (low) with Negative Trend.
• The credit quality of the collateral cover pool and the substantial support of the cover pool in case of the default of BPE.
• BPE’s capabilities with respect to origination of the cover assets and servicing of the cover pool.

According to DBRS “Rating European Covered Bonds” methodology, the rating of the Covered Bonds, although linked to that of the Issuer, can be one notch above the Issuer’s rating in instances where DBRS Legal and Structuring Framework (LSF) matrices cannot be applied or their application would otherwise result in the covered bonds being rated at the same level as the Issuer.

DBRS has assessed the LSF related to the Spanish CH as “Modest” according to its rating methodology. For more information, please refer to “DBRS Commentary on Spanish Cedulas Hipotecarias Legal and Structuring Framework”, available at www.dbrs.com. Based on the information provided by the issuer and DBRS rating analysis, BPE cover pool credit assessment did not allow for any uplift from the Issuer rating. DBRS has formed a view on the availability and sufficiency of the cover pool to satisfy the claims of the CH holders in a post issuer insolvency scenario. As a result, the Covered Bonds can be assigned a rating of ‘A’.

A downgrade of the Issuer would lead to a downgrade of the CH by an equal number of notches.

As of 31 December 2012, the cover pool amounts to EUR 59.366 bn. The cover pool is formed mainly by residential mortgage loans (41%) but also by commercial (35%) and developers land and other types of loans (24%).

The reference rate of the underlying loans is primarily floating (89% of the cover pool), indexed primarily to 12 months Euribor, while 85% of the CH outstanding yields a fixed coupon.

The weighted average life of the cover pool is 18.4 years, while that of the covered bonds is 2.5 years.

The Nominal Over-collateralisation level taking into account the assets as of 31 December 2012 and the liabilities as of 23 April 2013 is of 122.86%. This is sufficient, in DBRS view, for the CH to be rated A which is one notch above the Issuer rating of BPE. There are currently EUR 26.6bn of CH outstanding.

For further information on BPE CH please refer to the ratings report that will shortly be available on www.dbrs.com.

Notes:
All figures are in Euros unless otherwise noted.

The principal methodologies applicable are:
• Rating European Covered Bonds
• Global Methodology for Rating Banks & Banking Organisations
• Legal Criteria for European Structured Finance Transactions
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Master European Granular Corporate Securitisations (SME CLOs)
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model Methodology for European Securitisations

These can be found on dbrs.com under Methodologies. For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area”.

The sources of information used for this rating include data related to the cover pool provided by BPE. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This is the first DBRS rating on this financial instrument.

For additional information on this rating, please see the related linking document.

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

Lead Analyst: Vito Natale
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: April 24 2013