Morningstar DBRS Confirms Credit Ratings on Santander Consumer Spain Auto 2023-1 FT

DBRS Ratings GmbH (Morningstar DBRS) confirmed its credit ratings on the notes issued by Santander Consumer Spain Auto 2023-1 FT (the Issuer) as follows:

-- Class A Notes at AA (sf)
-- Class B Notes at A (high) (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (high) (sf)
-- Class E Notes at BB (sf)

The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in September 2036. The credit ratings on the Class B Notes, Class C Notes, Class D Notes, and Class E Notes address the ultimate payment of interest and the ultimate repayment of principal by the legal final maturity date.

CREDIT RATING RATIONALE
The confirmations 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 September 2024 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables;
-- No revolving period termination events have occurred; 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 Spanish auto loan receivables originated and serviced by Santander Consumer Finance, S.A. (SCF). The original portfolio of EUR 600.0 million consisted of loans granted primarily to private individuals for the purchase of both new and used vehicles. The transaction closed in October 2023 and includes a 14-month revolving period, scheduled to end in December 2024 (included).

PORTFOLIO PERFORMANCE
As of the September 2024 payment date, loans that were 0 to 30 days, 30 to 60 days, and 60 to 90 days delinquent represented 1.6%, 0.4%, and 0.3% of the outstanding performing portfolio balance, respectively. Loans more than 90 days delinquent were 0.5%. Gross cumulative defaults amounted to 0.9% of the aggregate initial and subsequent portfolio additions, 5.4% of which has been recovered 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 8.8% and 36.1%, respectively, based on the actual portfolio composition given the upcoming end of the revolving period.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the notes. As of the September 2024 payment date, credit enhancement to the Class A, Class B, Class C, Class D and Class E Notes marginally increased to 16.9%, 9.5%, 6.1%, 3.6%, and 0.2% from 16.7%, 9.2%, 5.9%, 3.3% and 0.0%, respectively, since closing due to the portfolio being replenished above its original balance.

The transaction benefits from liquidity support provided by an amortising cash reserve, available to cover senior expenses and interest payments on the rated notes. The reserve has a target balance equal to 1.75% of the outstanding balance of the Class A to Class E Notes, subject to a floor of EUR 8.1 million. As of the September 2024 payment date, the reserve was at its target balance of EUR 10.5 million.

Société Générale S.A., Sucursal en España (SG) acts as the account bank for the transaction. Based on Morningstar DBRS' private credit rating on SG, 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.

Banco Santander SA (Santander) acts as the hedging counterparty in the transaction. Morningstar DBRS' public Long Term Critical Obligations Rating of AA (low) on Santander is consistent with the first rating threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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, 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 Factors in Credit Ratings" at https://dbrs.morningstar.com/research/437781.

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" (6 August 2024), https://dbrs.morningstar.com/research/437540.

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 Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include quarterly transaction reports and information provided by Santander de Titulización S.G.F.T., S.A. (the Management Company) and loan-level data provided by the European DataWarehouse GmbH. Additionally, Morningstar DBRS was provided with updated historical performance data from the originator as follows:
-- Quarterly static default data from 2017Q4 to 2024Q1;
-- Monthly static recovery data from 2017Q4 to 2024Q1; and
-- Dynamic delinquencies and prepayments monthly data from January 2023 to June 2024.

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 16 October 2023, when Morningstar DBRS finalised its provisional credit ratings on the Class A, Class B, Class C, Class D, and Class E Notes at AA (sf), A (high) (sf), A (sf), BBB (high) (sf), and BB (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Helvia Meana.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://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 8.8% and 36.1%, respectively.

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

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

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of A (sf)
-- 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD, expected credit rating of A (low) (sf)
-- 50% increase in PD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)

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

Class E Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BB (low) (sf)
-- 50% increase in LGD, expected credit rating of B (low) (sf)
-- 25% increase in PD, expected credit rating of BB (low) (sf)
-- 50% increase in PD, expected credit rating of B (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 (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating below B (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: Helvia Meana, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 14 September 2023

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 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 (18 September 2024),
https://dbrs.morningstar.com/research/439581.
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165.
-- Master European Structured Finance Surveillance Methodology (6 August 2024),
https://dbrs.morningstar.com/research/437540.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781.
-- Operational Risk Assessment for European Structured Finance Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024), https://dbrs.morningstar.com/research/439583.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024), https://dbrs.morningstar.com/research/439913.
-- Derivative Criteria for European Structured Finance Transactions (6 September 2024),
https://dbrs.morningstar.com/research/439043.

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.