DBRS Upgrades Rating on IBL Finance S.r.l. (IBL CQS 2015)

DBRS Ratings GmbH (DBRS) upgraded the rating on the Class A Notes issued by IBL Finance S.r.l. (IBL CQS 2015) (the Issuer) to AA (low) (sf) from A (high) (sf).

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 December 2040.

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

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

IBL CQS 2015 is a securitisation of salary-assignment loans and delegation of payments loans extended to pensioners and individuals working in the public sector, originated and serviced by IBL – Istituto Bancario del Lavoro S.p.A. (IBL). The transaction closed in 2015 and benefited from a ramp-up period, which ended on the payment date falling in November 2016.

PORTFOLIO PERFORMANCE
As of March 2019, loans that were two- to three-months in arrears represented 1.3% of the outstanding portfolio balance, up from 0.9% in March 2018. The 90+ delinquency ratio was 1.4%, up from 0.9% in March 2018, and the cumulative default ratio was 3.1%.

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 7.6% and 6.1%, respectively.

CREDIT ENHANCEMENT
As of the March 2019 payment date, credit enhancement to the Class A Notes was 19.4%, up from 10.0% at the DBRS initial rating.

The transaction benefits from an amortising reserve fund. It is available to cover senior fees, expenses and any interest shortfall on the Class A Notes. As of the March 2019 payment date, the reserve fund was at its EUR 21.3 million target level.

The Bank of New York Mellon – Milan Branch and The Bank of New York Mellon – London Branch act as the Italian and English account banks for the transaction. Based on the public ratings of the account banks, the downgrade provisions outlined in the transaction documents and structural mitigants, DBRS considers the risk arising from the exposure to the account banks to be consistent with the rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

The transaction structure was analysed in Intex DealMaker.

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/333487/rating-sovereign-governments.pdf.

The sources of data and information used for this rating include investor reports and servicer reports provided by IBL 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 30 May 2018, when DBRS confirmed the rating of the Class A Notes at A (high) (sf).

The lead analyst responsibilities for this transaction have been transferred to Ettore Grassini.

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 7.6% and 6.1%, respectively. At the AA (low) (sf) rating level, the corresponding PD and LGD are 34.7% and 57.6%, 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 fall to A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to A (high) (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 fall to A (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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 GmbH are subject to EU and US regulations only.

Lead Analyst: Ettore Grassini, Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 22 May 2015

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Geschäftsführer: Detlef Scholz
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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
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- 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.