Press Release

DBRS Morningstar Confirms AA Rating on Cajasur Banco S.A. Cédulas Hipotecarias

Covered Bonds
July 17, 2020

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AA rating on the Cédulas Hipotecarias (CH; the Spanish Mortgage Covered Bonds) with ISIN ES0413464027 under the Cajasur Banco S.A. Covered Bonds (Cédulas Hipotecarias - Mortgages) programme (the Programme). This rating action follows the completion of a full review of the Programme.

Concurrently, DBRS Morningstar discontinued its rating on the CH ES0413464019, which repaid on 16 March 2020.

As of today, there were four CH series under the Programme, totalling an outstanding nominal amount of EUR 2.0 billion. All CH series issued under the Programme rank pari passu with each other.

The rating reflects the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) reflective of the likelihood that the source of payments will switch from the Reference Entity to the cover pool (CP). Cajasur Banco S.A. (Cajasur) is the Issuer and Reference Entity for the Programme. There is no Critical Obligations Rating associated with the Reference Entity and DBRS Morningstar classifies Spain as a jurisdiction in which covered bonds are a particularly important funding instrument.
-- A legal and structuring framework (LSF) assessment of “Average” associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of BBB (low), which is the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-L of A (high).
-- A two-notch uplift for high recovery prospects.
-- A level of overcollateralisation (OC) of 89.7% to which DBRS Morningstar gives credit, which is the minimum observed OC level during the past 12 months adjusted by a scaling factor of 0.85.

DBRS Morningstar analysed the transaction using its European Covered Bond Cash Flow tool. The main assumptions focused on the timing of defaults and recoveries of the assets, interest rate stresses, and market value spreads to calculate liquidation values on the CP.

Everything else being equal, a one-notch downgrade of the CBAP would lead to a one-notch downgrade of the LSF-L, resulting in a one-notch downgrade of the covered bonds rating.

In addition, everything else being equal, the CH rating would be downgraded if any of the following were to occur: (1) the CPCA were downgraded below BBB (low); (2) the quality of the CP and the level of OC were no longer sufficient to support a two-notch uplift for high recovery prospects; (3) the relative amortisation profile of the CH and CP moved adversely; or (4) volatility in the financial markets were to cause the currently estimated market value spreads to increase.

The total outstanding amount of CH is currently EUR 2.0 billion. As at 31 March 2020, the aggregate balance of the mortgages in the CP was EUR 7.4 billion, resulting in a total OC of 264.5%. The eligible CP stands at EUR 6.3 billion, resulting in an eligible OC of 210.7%. The level of OC to which DBRS Morningstar gives credit has been determined considering the lowest OC level during the past 12 months, observed in March 2020 for a few days, in the context of the refinancing of CH ES0413464019 (reimbursed on 16 March 2020) via the issuance of CH ES0413464027 (occurred on 11 March 2020).

As of March 2020, the CP comprised 105,094 mortgage loans with a weighted-average current unindexed loan-to-value ratio of 56.2%, split as follows: 85.1% residential, 8.3% commercial, 3.6% developers, and 3.0% land loans. The pool is concentrated in Andalusia (98.4%), Cajasur’s main area of business activity. The pool has a seasoning of 8.3 years.

The majority of the loans in the CP (79.0%) are floating rate, while 26.2% of the liabilities pay a fixed coupon. As is usual in Spanish CH, there are no swaps for the benefit of the CH holders. This has been accounted for in DBRS Morningstar’s cash flow analysis.

The weighted-average life of the assets is approximately 9.8 years, while that of the covered bonds is about 5.7 years. The resulting asset-liability maturity mismatch is mitigated by the available OC.

All liabilities are denominated in euros, while 0.03% of the pool assets by loan balance were originated in a different currency. This residual exposure is mitigated by the available OC.

DBRS Morningstar has assessed the LSF related to the Programme as “Average” according to its rating methodology. For more information, please refer to the DBRS Morningstar commentaries: “Spanish Mortgage Covered Bonds: Legal and Structuring Framework Review” and “DBRS Assigns Legal and Structuring Framework Assessment to Spanish Mortgage Covered Bonds Programmes”, which are available at

For further information on the Programme, please refer to the rating report that is available on

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may arise in the coming months for many CPs, some meaningfully. The rating is based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. In the cover pool analysis of this programme, DBRS Morningstar assumed a moderate decline in residential property prices.

The DBRS Morningstar Sovereign group released on 16 April 2020 a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were updated on 1 June 2020. For details see the following commentaries: and DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 24 April 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated covered bonds in Europe. For more details, please see: and

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at:

All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is “Rating and Monitoring Covered Bonds” (27 April 2020).

DBRS Morningstar 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 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 at:

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 “Global Methodology for Rating Sovereign Governments” at:

The sources of data and information used for this rating include stratification tables on the CP as at 31 March 2020 provided by Cajasur.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial ratings, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS Morningstar 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 11 March 2020, when DBRS Morningstar assigned a AA rating to the CH ES0413464027.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

Lead Analyst: Antonio Laudani, Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 19 July 2019

DBRS Ratings GmbH, Sucursal en España
Calle del Pinar, 5
28006 Madrid
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of this transaction can be found at:

-- Rating and Monitoring Covered Bonds (27 April 2020),
-- Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (27 April 2020),
-- Global Methodology for Rating Banks and Banking Organisations (20 June 2020),
-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
-- European RMBS Insight Methodology (2 April 2020) and European RMBS Insight Model,
-- European RMBS Insight: Spanish Addendum (10 July 2019),
-- Operational Risk Assessment for European Structured Finance Originators (28 February 2020),
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020),
-- Rating CLOs and CDOs of Large Corporate Credit (28 February 2020),
-- Rating CLOs Backed by Loans to European SMEs (8 July 2019) and DBRS Diversity Model v2.4,
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019),
-- Currency Stresses for Global Structured Finance Transactions (15 April 2020),
-- Global Methodology for Rating Sovereign Governments (17 September 2019),

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at:

For more information on this credit or on this industry, visit or contact us at

This press release was amended on 19 August 2020 to clarify the number of liabilities paying a fixed coupon.