DBRS Morningstar Upgrades and Confirms Ratings on Asti Group RMBS II S.r.l.

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by Asti Group RMBS II S.r.l. (the Issuer):

-- Class A confirmed at AAA (sf)
-- Class B upgraded to AA (low) (sf) from A (high) (sf)

The rating actions described above follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the March 2022 payment date;
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

The transaction is a static securitisation of Italian residential mortgages originated and serviced by Cassa di Risparmio di Asti S.p.A. (CR Asti), which originated 87.3% of the initial mortgage pool, and Cassa di Risparmio di Biella e Vercelli S.p.A. (BiverBanca), a wholly-owned subsidiary of CR Asti, which originated 12.7% of the pool. Effective from November 2021, Biverbanca was merged by incorporation into CR Asti. The transaction closed in June 2019 with an initial portfolio balance of EUR 988.0 million.

PORTFOLIO PERFORMANCE
As of 31 May 2022, loans that were 0 to 30 days, 30 to 60 days, and 60 to 90 days delinquent represented 0.04%, 0.7%, and 0.2% of the outstanding principal balance, respectively, while loans more than 90 days delinquent represented 0.4%. Gross cumulative defaults amounted to 0.4% of the initial portfolio balance to date, with cumulative principal recoveries of 13.8% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 9.2% and 13.2%, respectively.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the rated notes. As of the March 2022 payment date, credit enhancement to the Class A notes increased to 29.1% from 25.3% at the time of the last annual review 12 months ago; credit enhancement to the Class B notes increased to 20.2% from 17.2%.

The transaction benefits from a cash reserve, funded at closing to EUR 17.8 million using subordinated loans granted by Asti and BiverBanca. The reserve provides liquidity support to the rated notes and is available to cover senior expenses, interest on the Class A notes, and, as long as the gross cumulative default ratio does not exceed 4.5%, interest on the Class B notes. The reserve is amortising with a target balance equal to 2.0% of the outstanding balance of the rated notes, subject to a floor of EUR 8.9 million. As of the March 2022 payment date, the reserve was at its target of EUR 11.9 million.

BNP Paribas Securities Services, Milan Branch (BNPPSS Milan) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on BNPPSS Milan, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the rated notes in the transaction, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at: https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (19 May 2022).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

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 legal documents have remained unchanged since the most recent rating action.

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/381451/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these ratings include investor reports provided by KPMG Fides Servizi di Amministrazione S.p.A. (the Computation Agent), servicer reports provided by CR Asti, and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial rating, DBRS Morningstar was 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 purpose of providing these ratings 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 25 June 2021, when DBRS Morningstar upgraded the rating on the Class A notes to AAA (sf) from AA (low) (sf) and upgraded the rating on the Class B notes to A (high) (sf) from BBB (high) (sf).

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

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (the base case):

-- DBRS Morningstar 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 assumptions for the remaining collateral pool are 9.2% and 13.2%, 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), ceteris paribus. If the PD increases by 50%, the rating of the Class A notes would be expected to decrease to AA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to decrease to AA (low) (sf).

Class A 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 AA (high) (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 AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class B 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 A (low) (sf)
-- 50% increase in PD, expected rating of BBB (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 (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 28 June 2019

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

-- Master European Structured Finance Surveillance Methodology (19 May 2022), https://www.dbrsmorningstar.com/research/397033/master-european-structured-finance-surveillance-methodology.
-- European RMBS Insight Methodology (28 March 2022) and European RMBS Insight Model v5.5.0.2, https://www.dbrsmorningstar.com/research/394309/european-rmbs-insight-methodology.
-- European RMBS Insight: Italian Addendum (10 December 2021), https://www.dbrsmorningstar.com/research/389473/european-rmbs-insight-italian-addendum.
-- Legal Criteria for European Structured Finance Transactions (29 July 2021), https://www.dbrsmorningstar.com/research/382171/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021), https://www.dbrsmorningstar.com/research/384513/operational-risk-assessment-for-european-structured-finance-servicers.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021), https://www.dbrsmorningstar.com/research/384920/interest-rate-stresses-for-european-structured-finance-transactions.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022), https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].