DBRS Confirms Rating on Claris ABS 2011 S.r.l.

DBRS Ratings Limited (DBRS) confirmed its AAA (sf) rating on the Class A Notes issued by Claris ABS 2011 S.r.l. (the Issuer).

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal Final Maturity Date in October 2060.

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses, as of the 30 April 2018 payment date;
-- Updated probability of default (PD), loss given default (LGD) and expected loss assumptions for the remaining collateral portfolio; and
-- Current credit enhancement available to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Claris ABS 2011 S.r.l. is a securitisation of Italian residential mortgages originated by three Italian banks: Veneto Banca SpA (VB), Banca Apulia S.p.A., and Cassa di Risparmio di Fabriano e Cupramontana S.p.A., all part of the Veneto Banca banking group. Effective from 26 June 2017, following the liquidation of VB, the servicing and operating activities of the transaction were transferred with no disruption to Intesa Sanpaolo S.p.A. Please refer to DBRS’s commentary “No Disruption in Servicing Activities of BPVi and VB Securitisations” for more information. As of March 2018, the portfolio totalled EUR 1,198 million with a pool factor of 45.8%. Most of the portfolio consists of first-lien mortgages with approximately 8.0% being second lien. The transaction closed on 7 February 2012.

PORTFOLIO PERFORMANCE
As of March 2018, two- to three-month arrears represented 0.4% of the outstanding portfolio balance, up from 0.1% in March 2017. As of March 2018, the 90+ delinquency ratio was 2.7%, up from 2.3% in March 2017. As of March 2018, the cumulative default ratio was 5.8%. As of March 2018, the cumulative loss ratio was 4.8%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 10.1% and 32.2%, respectively.

CREDIT ENHANCEMENT
As of the April 2018 payment date, credit enhancement to the Class A Notes was 65.1%, up from 27.6% at the transaction closing. Credit enhancement is provided by the overcollateralisation of the portfolio of mortgages and includes the Cash Reserve, which provides credit support in the event of the Issuer’s default and at Final Maturity. The reserve stands at its current target level of EUR 20.5 million.

The Bank of New York Mellon SA/NV - Milan Branch acts as the account bank for the transaction. The DBRS public rating of The Bank of New York Mellon SA/NV - Milan Branch at AA is consistent 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.

J.P. Morgan Securities plc acts as the swap counterparty for the transaction. DBRS's private rating of J.P. Morgan Securities plc is consistent with the First Rating Threshold as described in DBRS's "Derivative Criteria for European Structured Finance Transactions" methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the “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.

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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include investor reports provided by The Bank of New York Mellon SA/NV - Milan Branch, servicer reports provided by Intesa Sanpaolo S.p.A. and loan-level data provided by 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.

The last rating action on this transaction took place on 18 May 2017, when DBRS confirmed its AAA (sf) rating of the Class A Notes.

The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the “Base Case”):

-- DBRS expected a lifetime base case PD and LGD for the pool 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 current pool of loans for the Issuer are 10.1% and 32.2%, respectively.
-- 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 remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (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 remain at AAA (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

For further information on DBRS historic 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: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 13 February 2012

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The rating methodologies 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
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

This press release was amended on 24 May 2018 to correct a typo in the Risk Sensitivities section that incorrectly listed PD instead of LGD.