Morningstar DBRS Upgrades Credit Rating on GAMMA - Sociedade de Titularização de Créditos, S.A. (Hipototta No. 13)

DBRS Ratings GmbH (Morningstar DBRS) upgraded to AA (sf) from AA (low) (sf) its credit rating on the Class A Notes issued by GAMMA - Sociedade de Titularização de Créditos, S.A. (Hipototta No. 13) (the Issuer).

The credit rating addresses the timely payment of interest and the ultimate payment of principal on or before the final maturity date in October 2072.

CREDIT RATING RATIONALE
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, as of the April 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 Class A Notes to cover the expected losses at the AA (sf) credit rating level.

Hipototta No. 13 is a securitisation of Portuguese residential mortgages originated and serviced by Banco Santander Totta S.A. (BST), a core operating subsidiary within the Banco Santander S.A. group. The assets are serviced by BST, with Banco Santander S.A. acting as the backup servicer facilitator. The transaction closed in January 2018, when the special-purpose vehicle issued two classes of floating-rate notes (the Class A and Class B Notes) and one class of additional return notes (the Class C Notes).

PORTFOLIO PERFORMANCE
As of the March 2024 cut-off date, delinquencies were low, with loans two to three months in arrears representing 0.11% of the outstanding portfolio balance, up from 0.05% as of the March 2023 cut-off date. The 90+ days in arrears represented 0.19% of the outstanding portfolio balance, up from 0.08% as of March 2023. The gross cumulative default ratio was equal to 0.25% of the initial portfolio balance, slightly up from 0.19% last year.

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 3.0% and 10.0%, respectively.

CREDIT ENHANCEMENT
Overcollateralisation of the outstanding collateral portfolio and the reserve fund provide credit enhancement to the Class A Notes. As of the April 2024 payment date, credit enhancement to the Class A Notes was 58.9%, up from 48.5% in April 2023.

The transaction benefits from an amortising reserve fund, available to cover shortfalls on senior fees, expenses, interest payments on the Class A Notes, and to clear the Class A Notes principal deficiency ledger. The reserve is currently at its target level of EUR 33.0 million, which is its floor level of 1.5% of the initial portfolio balance.

Banco Santander Totta S.A. acts as the account bank for the transaction. Based on the Morningstar DBRS Long-Term Issuer Rating of Banco Santander Totta S.A. at "A", the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit rating assigned to the Class A Notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit rating on the Class A Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

Morningstar DBRS' credit rating does not address non-payment 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 default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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, 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 rating 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 surveillance section of 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 this credit rating include servicer reports provided by Citibank N.A., London branch, servicer reports and additional information provided by BST, as well as 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 rating, Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing this credit rating 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 issuer took place on 10 July 2023, when Morningstar DBRS confirmed its AA (low) (sf) rating on the Class A Notes.

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 rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):

-- The base case PD and LGD of the current pool of loans for the Issuer are 3.0% and 10.0%, respectively.
-- The Risk Sensitivity overview below illustrates the credit ratings expected if the PD and LGD increase by a certain percentage over the base case assumption.

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

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Pascale Kallas, Assistant Vice President,
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 9 January 2018

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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.

-- Master European Structured Finance Surveillance Methodology (7 March 2024), https://dbrs.morningstar.com/research/429051.
-- Legal Criteria for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435165.
-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435278.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572.
-- European RMBS Insight Methodology (25 March 2024) and European RMBS Insight model v 8.0.0.1, https://dbrs.morningstar.com/research/430103.
-- European RMBS Insight: Portuguese Addendum (19 April 2024), https://dbrs.morningstar.com/research/431376.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (7 June 2024), https://dbrs.morningstar.com/research/434095.

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 info-DBRS@morningstar.com.