Press Release

DBRS Morningstar Takes Rating Actions on Two Caixabank Consumo Transactions

Consumer Loans & Credit Cards

July 18, 2022

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by Caixabank Consumo 2 F.T. (Caixabank Consumo 2) and by Caixabank Consumo 3 F.T. (Caixabank Consumo 3):

Caixabank Consumo 2:
-- Series A upgraded to AAA (sf) from AA (sf)
-- Series B upgraded to A (sf) from BBB (high) (sf)

Caixabank Consumo 3:
-- Series A confirmed at AA (high) (sf)
-- Series B confirmed at CC (sf)

The ratings on the respective Series A notes address the timely payment of interest and the ultimate repayment of principal by the final legal maturity date in April 2060 for Caixabank Consumo 2 and in March 2053 for Caixabank Consumo 3. The ratings on the respective Series B notes address the ultimate payment of interest and repayment of principal by the final legal maturity date.

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

The two transactions are static securitisations collateralised by a portfolio of consumer loans granted and serviced by CaixaBank, S.A. (CaixaBank) to individuals in Spain. The portfolios consist of unsecured consumer loans and receivables secured by residential property, including standard mortgages (préstamos hipotecarios) as well as drawdowns from revolving credit lines (disposiciones de crédito hipotecario). Caixabank Consumo 2 closed in June 2016 with an initial portfolio of EUR 1.3 billion, while Caixabank Consumo 3 closed in July 2017 with an initial portfolio of EUR 2.5 billion.

PORTFOLIO PERFORMANCE
Caixabank Consumo 2:
As of the April 2022 payment date, loans that were 30- to 60-days delinquent represented 0.1% of the outstanding collateral balance and 60- to 90-day delinquencies represented 0.1%, while delinquencies greater than 90 days represented 5.1%. Gross cumulative defaults amounted to 2.6% of the original portfolio balance, 23.8% of which has been recovered to date.

Caixabank Consumo 3:
As of the June 2022 payment date, loans that were 30- to 60-days delinquent represented 0.2% of the outstanding collateral balance and 60- to 90-day delinquencies represented 0.0%, while delinquencies greater than 90 days represented 4.7%. Gross cumulative defaults amounted to 4.4% of the original portfolio balance, 7.8% of which has been recovered to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
For Caixabank Consumo 2, DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and maintained its PD and LGD assumptions at 5.5% and 60.7%, respectively, for the unsecured consumer loans in the portfolio, and updated its PD and LGD assumptions to 4.3% and 6.8%, respectively, for the mortgage loans in the portfolio.

For Caixabank Consumo 3, DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its PD and LGD assumptions to 5.9% and 67.3%, respectively, for the unsecured consumer loans in the portfolio, and updated its PD and LGD assumptions to 3.8% and 4.5%, respectively, for the mortgage loans in the portfolio.

CREDIT ENHANCEMENT
The subordination of the Series B notes and the cash reserve provides credit enhancement to the Series A notes, while the sole source of credit enhancement to the Series B notes is the cash reserve, following the full repayment of the Series A notes.

For Caixabank Consumo 2, as of the April 2022 payment date, credit enhancement to the Series A notes increased to 118.2% from 97.0% at the time of the last annual review; credit enhancement to the Series B notes increased to 33.8% from 27.7%. For Caixabank Consumo 3, credit enhancement to the Series A notes increased to 57.8% from 39.3% at the time of the last annual review 12 months ago, while credit enhancement to the Series B notes has remained at 4.4%.

The transactions benefit from an amortising reserve fund available to cover senior expenses and all payments due on the senior-most class of notes outstanding.

For Caixabank Consumo 2, this reserve was funded to EUR 52.0 million at closing through a subordinated loan granted by CaixaBank and has a target level equal to the lower of its original balance and 8.0% of the outstanding principal balance of the Series A and Series B notes, subject to a floor of EUR 26.0 million. The reserve could have started amortising as of the July 2018 payment date, but because delinquencies greater than 90 days exceeded 1.5% of the portfolio balance, amortisation did not occur. As this performance trigger continues to be breached, the reserve remains at its original balance of EUR 52.0 million.

For Caixabank Consumo 3, the reserve was funded to EUR 98.0 million at closing through a subordinated loan granted by CaixaBank and, starting from the September 2019 payment date, has been amortising to its target level of 4% of the outstanding principal balance of the Series A and Series B notes. As of the June 2022 payment date, the cash reserve was at its target of EUR 14.3 million.

CaixaBank acts as the account bank provider for the transactions. Based on DBRS Morningstar’s account bank reference rating of A (high) on CaixaBank (which is one notch below its DBRS Morningstar Long Term Critical Obligations Rating of AA (low)), the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structures, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the Series A notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant impact 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.

DBRS Morningstar analysed the transaction structures in Intex DealMaker.

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 these transactions 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 transactions in accordance with the principal methodology.

A review of the transactions’ legal documents was not conducted as the legal documents have remained unchanged since the most recent rating actions.

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 and additional information provided by CaixaBank Titulización, S.G.F.T., S.A.U. (the Management Company) as well as 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 ratings, 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 purposes 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 Caixabank Consumo 2 took place on 30 August 2021, when DBRS Morningstar confirmed its ratings on the Series A and Series B notes at AA (sf) and BBB (high) (sf), respectively. The last rating action on Caixabank Consumo 3 took place on 19 July 2021, when DBRS Morningstar confirmed its ratings on the Series A and Series B notes at AA (high) (sf) and CC (sf), respectively.

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

Sensitivity Analysis: To assess the impact of changing the transactions’ 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.
-- For Caixabank Consumo 2, the base case PD and LGD of the current pool of mortgage receivables are 4.3% and 6.8%, respectively. The base case PD and LGD of the current pool of unsecured consumer loan receivables are 5.5% and 60.7%, respectively.
-- For Caixabank Consumo 3, the base case PD and LGD of the current pool of mortgage receivables are 3.8% and 4.5%, respectively. The base case PD and LGD of the current pool of unsecured consumer loan receivables are 5.9% and 67.3%, 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 Caixabank Consumo 2 Series A notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Caixabank Consumo 2 Series A notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Caixabank Consumo 2 Series A notes would be expected to remain at AAA (sf).

Caixabank Consumo 2 Series 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 AAA (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 AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Caixabank Consumo 2 Series B Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of BBB (high) (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 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 (high) (sf)

Caixabank Consumo 3 Series A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (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)

The rating on the Caixabank Consumo 3 Series B notes would not be affected by any change in either the PD or the LGD.

For further information on DBRS Morningstar 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. 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 Dates: 20 June 2016 (Caixabank Consumo 2), 18 July 2017 (Caixabank Consumo 3)

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 these transactions can be found at: https://www.dbrsmorningstar.com/about/methodologies.

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 these credits or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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