Morningstar DBRS Upgrades Credit Ratings on Caixabank Consumo 5 F.T.

DBRS Ratings GmbH (Morningstar DBRS) upgraded its credit ratings on the Series A Notes and Series B Notes (together, the Notes) issued by Caixabank Consumo 5 F.T. (the Issuer) as follows:

-- Series A Notes upgraded to AAA (sf) from AA (high) (sf)
-- Series B Notes upgraded to BB (high) (sf) from B (high) (sf)

The credit rating on the Series A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in October 2054. The credit rating on the Series B Notes addresses the ultimate payment of interest and principal on or before the legal final maturity date.

The upgrades 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 January 2024 payment date;
-- Probability of default (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 credit rating levels.

The transaction is a securitisation of unsecured consumer loans granted to individuals residing in Spain by CaixaBank, S.A. (CaixaBank), which also services the portfolio and acts as the Issuer account bank. The transaction closed in June 2020. At closing, the static EUR 3.6 billion collateral portfolio consisted of loans granted primarily to borrowers in Catalonia (31.5% of the initial portfolio balance), Andalusia (17.6%), and Madrid (10.5%). As of the January 2024 payment date, the outstanding collateral portfolio stood at EUR 474.8 million.

PORTFOLIO PERFORMANCE
As of the January 2024 payment date, loans that were 0 to 30 days, 30 to 60 days, and 60 to 90 days delinquent represented 0.5%, 0.3%, and 0.03% of the outstanding portfolio balance, respectively, while loans more than 90 days delinquent represented 4.1%. Gross cumulative defaults amounted to 4.7% of the aggregate original portfolio balance, with cumulative recoveries of 14.5% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 6.0% and 71.4%, respectively.

CREDIT ENHANCEMENT
The subordination of the Series B Notes and the cash reserve provides credit enhancement to the Series A Notes while the cash reserve provides credit enhancement to the Series B Notes only following the full repayment of the Series A Notes. As of the January 2024 payment date, credit enhancement to the Series A Notes increased to 73.4% from 38.3% at the time of the last annual review while credit enhancement to the Series B Notes increased to 6.1% from 5.9%. The significant amortisation of the Series A Notes and increased credit enhancement prompted the upgrades on the Notes.

The transaction benefits from an amortising cash reserve available to cover senior expenses and all payments due on the senior-most class of notes outstanding at the time. The reserve was funded to EUR 177.5 million at closing through a subordinated loan granted by CaixaBank and, as long as the reserve has been replenished to its target level on the previous payment date, it will amortise to its target level of 5.0% of the outstanding principal balance of the Notes. As of the January 2024 payment date, the reserve was at its target amount of EUR 29.0 million.

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

Morningstar DBRS’ credit ratings on the rated notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

Morningstar DBRS’ credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

Morningstar DBRS’ long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of defaults to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the term under which a long-term obligation has been issued.

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at: https://dbrs.morningstar.com/research/427030.

Morningstar DBRS analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is the “Master European Structured Finance Surveillance Methodology” (7 March 2024), https://dbrs.morningstar.com/research/429051.

Other methodologies referenced in this transaction are listed at the end of this press release.

Morningstar 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 credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit 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://dbrs.morningstar.com/research/421590.

The sources of data and information used for these credit ratings include investor reports provided by CaixaBank Titulización, S.G.F.T., S.A. and loan-level data provided by the European DataWarehouse GmbH.

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

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

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this transaction took place on 5 April 2023, when Morningstar DBRS upgraded its credit rating on the Series A Notes to AA (high) (sf) from AA (sf) and confirmed its credit rating on the Series B Notes at B (high) (sf).

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com.

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

-- Morningstar 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 6.0% and 71.4%, respectively.

Series A Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)

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

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit 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 Credit Rating Date: 18 June 2020

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

-- Rating European Structured Finance Transactions Methodology (11 December 2023), https://dbrs.morningstar.com/research/425149
-- Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219
-- Master European Structured Finance Surveillance Methodology (7 March 2024), https://dbrs.morningstar.com/research/429051
-- Legal Criteria for European Structured Finance Transactions (30 June 2023), https://dbrs.morningstar.com/research/416730
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024), https://dbrs.morningstar.com/research/427030
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023), https://dbrs.morningstar.com/research/420602

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

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