DBRS Maintains Under Review with Positive Implications the Ratings of the Notes Issued by Caixabank Consumo 2, FT

DBRS Ratings Limited (DBRS) maintained its Under Review with Positive Implications (UR-Pos.) status on the rated notes (the Notes) issued by Caixabank Consumo 2, FT (the issuer) as follows:

-- Series A maintained at A (low) (sf) UR-Pos.
-- Series B maintained at BB (sf) UR-Pos.

The Notes were originally placed UR-Pos. on 30 April 2018, following the upgrade of the Kingdom of Spain’s Long-Term Foreign and Local Currency – Issuer Rating to “A” from A (low) (https://www.dbrs.com/research/326766/dbrs-takes-rating-actions-on-21-eu-structured-finance-transactions-following-spain-sovereign-rating-upgrade). The Series A and Series B notes continue to be placed UR-Pos. pending DBRS’s analysis of the recent performance of the Spanish real estate market. The rating confirmation and the maintenance of the UR-Pos. status on the Notes follows an annual review of the transaction incorporating the Spanish sovereign rating upgrade and the following analytical considerations:

-- The portfolio performance, in terms of level of delinquencies and cumulative net losses, as of the April 2018 payment date;
-- Revised default rate and expected loss assumptions for the remaining collateral pool;
-- The current levels of credit enhancement (CE) available to the Series A and Series B notes to cover expected losses assumed at the A (low) (sf) and BB (sf) rating levels, respectively.

The rating on the Series A notes addresses the timely payment of interest and the ultimate repayment of principal on or before the legal maturity date in April 2060.

The rating on the Series B notes addresses the ultimate payment of interest and repayment of principal on or before the legal maturity date in April 2060.

The issuer is a securitisation collateralised by a portfolio of consumer loans granted by CaixaBank, S.A. (Caixabank) to individuals in Spain. The portfolio consists of unsecured and mortgage loans, including standard contracts and drawdowns from a revolving credit line (Crédito Abierto).

PORTFOLIO PERFORMANCE
As of the April 2018 payment date, 30-day to 60-day delinquencies represented 0.3% of the outstanding principal balance and 60-day to 90-day delinquencies represented less than 0.1%, while delinquencies greater than 90 days represented 2.1%. The gross cumulative defaults as a ratio of the original portfolio were 0.9%, of which 5.2% have been recovered so far.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its probability of default (PD) and loss given default (LGD) base case assumptions on the remaining mortgage receivable portion of the portfolio to 5.3% and 36.7%; and on the remaining unsecured consumer loan pool to 12.6% and 78.5%, respectively. Also incorporated in these updated assumptions is the Spanish sovereign rating which was upgraded to “A” from A (low) on 6 April 2018.

CREDIT ENHANCEMENT
CE is provided to the Series A notes by the subordination of the Series B notes and the cash reserve; while CE to the Series B notes is provided solely by the cash reserve. CE to the Series A notes increased to 27.7% in April 2018, from 14.0% at closing; CE to the Series B notes increased to 7.9% from 4.0%.

Caixabank acts as the account bank for the transaction. Caixabank’s reference rating – one notch below its DBRS Long-Term Critical Obligations Rating of AA (low) – is consistent with the Minimum Institution Rating, given the rating assigned to the Series A, 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 to the ratings is: “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.

These ratings are UR-Pos. DBRS is undertaking a review and will remove the ratings from this status as soon as it is appropriate.

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 CaixaBank Titulización, S.G.F.T., S.A. – the management company – 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 these ratings 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 30 April 2018, when DBRS placed the Series A and Series B ratings UR-Pos., following the Spanish sovereign rating upgrade. The last annual review of the transaction took place on 22 June 2017, when DBRS confirmed its ratings of A (low) (sf) and BB (sf) on the Series A and Series B notes.

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

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

-- DBRS expected a base case PD and LGD for the portfolio 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 mortgage receivables are 5.3% and 36.7%, respectively. The Base Case PD and LGD of the current pool of unsecured consumer loan receivables are 12.6% and 78.5%, respectively.

For example, if the LGD increases by 50%, the rating of the Series A notes would be expected to remain at A (low) (sf), ceteris paribus. If the PD increases by 50%, the rating of the Series A notes would be expected to remain at A (low) (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Series A notes would be expected to decrease to BBB (high) (sf), ceteris paribus.

Series A notes risk sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

Series B Notes risk sensitivity:
-- 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in LGD, expected rating of B (high) (sf)
-- 25% increase in PD, expected rating of B (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of B (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of B (low) (sf)
-- 50% increase in PD, expected rating of B (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of CCC (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of CCC (sf)

These ratings are UR-Pos. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period.

For further information on DBRS historical 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: Joana Seara da Costa, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 20 June 2016

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

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

-- Master European Structured Finance Surveillance Methodology
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers

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.