DBRS Confirms Ratings on BBVA Cedulas Hipotecarias

DBRS Ratings Limited (DBRS) has today confirmed the ‘A’ (high)’ rating on all outstanding Banco Bilbao Vizcaya Argentaria SA (BBVA or Issuer) single Cedulas Hipotecarias (CH). The confirmation follows the completion of a full review of the rating.

Since June 2013, BBVA has commenced to adjust the property valuations on the mortgage loans backing the CH and going forward it will continue reviewing such values on a regular basis. Overall, DBRS believes updated valuations provide a clearer view on the assets backing the cover pool, reduce the amount and increase the quality of the eligible cover pool and enhance investor’s protection in case of an issuer’s default because the total overcollateralization has increased.

The rating action reflects the following analytical considerations:
• The Issuer and Senior Debt rating of ‘“A”’ with Negative Trend.
• The credit quality of the collateral and the substantial support of the cover pool in case of an issuer default of BBVA.
• BBVA’s capabilities with respect to origination of the cover pool 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 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’ (high)’).

As of December 2013, the total outstanding amount of CH is EUR40.85bn while the cover pool amount to EUR87.41bn, resulting in an over-collateralisation (OC) of 114%. The eligible cover pool stands at EUR55.15bn, resulting in and eligible OC of 35% above the minimum mandatory level of 25%.

The WALTV has increased from 58% (Dec-12) to 69% (Dec-13). The LTV increase has reduced the volume of eligible assets backing the CH (EUR63.76bn Dec-12 vs EUR55.15bn Dec-12); however, at the same time, the outstanding volume of CH has also been reduced to abide by the maximum issuance limit (EUR50bn Dec-12 vs EUR40.85 Dec-13). As a result, the available OC is 114% (Dec-13) compared to 67% one year ago.

For further information on BBVA CH please refer to the ratings report that can be found on www.dbrs.com

Notes:
All figures are in Euros unless otherwise noted.

The principal methodology applicable is: “Rating European Covered Bonds”. This can be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies

Other methodologies and criteria 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 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 information used for this rating include historical default performance data and cover pool stratification tables that allowed DBRS to further assess the portfolio. 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 programme took place on 20 February 2013, when DBRS assigned the rating of ‘A’ (high)’ to BBVA CH.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com

All else equal, a downgrade of the Issuer rating would lead to a downgrade of the CH by an equal number of notches.

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“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 regulations only.

Initial Lead Analyst: Vito Natale
Initial Rating Date: 20 February 2013
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 20 February 2014
Lead Analyst: Vito Natale
Rating Committee Chair: Quincy Tang
The back-up analyst responsibilities for this programme have been transferred to Covadonga Aybar.

DBRS Ratings Limited
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United Kingdom

Registered in England and Wales: No. 7139960

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

• 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
• Rating CLOs Baked by Loans to European Small and Medium-Sized Enerprises (SMEs)
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model Methodology for European Securitisations