DBRS Confirms Rating of Nostrum Mortgages No. 2

DBRS Ratings Limited (DBRS) has today confirmed its rating of the Class A Notes of Nostrum Mortgages No. 2 issued by Caixa Geral de Depósitos, S.A. (the Issuer) at AA (sf).

The confirmation of the rating of the Class A Notes is based upon the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the 20 February 2015 payment date.
-- Updated portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Incorporating 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 BBB (low) for the Republic of Portugal.
-- Current available credit enhancement for the Class A Notes to cover the expected losses at the AA (sf) rating level.

Nostrum Mortgages No. 2 is a securitisation of Portuguese residential mortgages originated and serviced by Caixa Geral de Depósitos S.A. This is the second transaction of pass-through mortgage-backed Notes originated by Caixa Geral de Depósitos S.A. back in 2010.

The portfolio is performing in line with DBRS’s expectations. The current 90+ delinquency ratio as a percentage of the performing balance of the portfolio was 0.80% in February 2015. The cumulative default ratio, as a percentage of the original balance, increased during the year reaching 2.80% in February 2015, but it is still below DBRS’s base case default rate of 15.53%.

Credit enhancement for the Class A Notes consists of the subordination of the Class B Notes and Cash Reserve Fund initially funded via the issuance of the Class C notes. The Cash Reserve Fund was equal to EUR 74.6 million, bellow the target amount of EUR 80.18 million. The credit enhancement to the Class A Notes is currently 30.90%, up from 27.64% in February 2014.

Banco Santander SA holds the Treasury Account for the transaction. The DBRS public rating of Banco Santander SA complies with the threshold for the Account Bank 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 is the “Master European Structured Finance Surveillance Methodology”. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies.

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 on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include investor reports provided by Deutsche Bank AG, Portuguese Branch (the Agent Bank) and data from the European DataWarehouse. 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 01 Mayo 2014, when DBRS confirmed the rating of AA (sf) to the Class A Notes.

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 to the parameters used to determine the rating (the Base Case):
-- DBRS expected a lifetime base case Probability of Default (PD) and Loss Given Default (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 15.53% and 23.74%, respectively. The corresponding levels at the AA (sf) rating level are 40.27% and 38.71%.
-- 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 Class A Notes would be expected to fall to AA (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to decrease to BB (high) (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating of the Class A Notes would be expected to decrease to BB (high) (sf).

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

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: Keith Gorman
Initial Rating Date: 4 May 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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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
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Unified Interest Rate Model for European Securitisations