DBRS Confirms Ratings of Caixabank RMBS 3, FT

DBRS Ratings Limited (DBRS) confirmed the following ratings on the bonds issued by Caixabank RMBS 3, FT (the Issuer):

-- Series A Notes at A (low) (sf)
-- Series B Notes at CC (sf)

The rating of the Series A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The rating of the Series B Notes addresses the ultimate payment of interest and principal on or before the legal final maturity date.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Series A Notes to cover the expected losses at the A (low) (sf) rating level.

Caixabank RMBS 3, FT is a securitisation of Spanish residential mortgage loans and drawdowns of mortgage lines of credit secured over residential properties located in Spain and originated and serviced by CaixaBank, S.A. (CaixaBank). The Issuer used the proceeds of the Series A and Series B notes to fund the purchase of the mortgage portfolio. In addition, CaixaBank provided separate additional subordinated loans to fund both the initial expenses and the Reserve Fund.

PORTFOLIO PERFORMANCE
As of September 2018, almost one year since closing, two- to three-month arrears represented 0.01% of the outstanding portfolio balance. The 90+ delinquency ratio was 0.9%, up from 0.2% in March 2018. As of September 2018, the cumulative default ratio was 0.0%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its PD and LGD assumptions on the remaining portfolio collateral pool to 21.6% and 57.2%, respectively, at the A (low) (sf) rating level.

CREDIT ENHANCEMENT
As of the September 2018 payment date, credit enhancement to the Series A Notes was 15.5%, up from 14.5% at the DBRS initial rating. The Series A Notes benefit from credit enhancement provided by the Series B Notes and a transaction Reserve Fund (RF). The RF provides liquidity support and credit support to the Series A Notes. After the first two years since closing, the RF may amortise over the life of the transaction subject to certain amortisation triggers. The RF is currently at its target level of EUR 114.8 million. Following the payment in full of the Series A Notes, the transaction RF will also provide liquidity and credit support to the Series B Notes.

CaixaBank acts as the account bank for the transaction. The account bank reference rating of A (high) - being one notch below the DBRS public Long-Term Critical Obligations Rating of CaixaBank of AA (low), is consistent with the Minimum Institution Rating given the rating assigned to the Series 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 to the ratings 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/333487/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include investor reports and servicer reports provided by CaixaBank Titulización, S.G.F.T., S.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 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 14 December 2017, when DBRS finalised its provisional ratings of the notes.

The lead analyst responsibilities for this transaction have been transferred to Francesco Amato.

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 7.8% and 35.4%, 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 Series A Notes would be expected to fall to BBB (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Series A Notes would be expected to fall to BBB (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Series A Notes would be expected to fall to BB (high) (sf).

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

The Series B Notes’ ratings would not be affected by any hypothetical change in neither LGD nor PD.
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: Francesco Amato, Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 12 December 2017

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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
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Interest Rate Stresses 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.