Morningstar DBRS Upgrades Its Credit Ratings on Cajasur Banco S.A. Cédulas Hipotecarias to AAA

DBRS Ratings GmbH (Morningstar DBRS) upgraded its credit ratings on the Cédulas Hipotecarias (CH; the Spanish Mortgage Covered Bonds) with ISIN ES0413464027 issued under the Cajasur Banco S.A. Covered Bonds (Cédulas Hipotecarias - Mortgages) programme (the Programme) to AAA from AA (high). This rating action follows the completion of a full review of the Programme.

As of today, there were two series of CH under the Programme, totalling an outstanding nominal amount of EUR 1.7 billion.

The rating reflects the following analytical considerations:

-- A Covered Bonds Attachment Point (CBAP) of "A (high)". Cajasur Banco S.A. (Cajasur) is the Issuer and Reference Entity for the Programme. There is no Critical Obligations Rating associated with the Reference Entity, but Morningstar DBRS classifies Spain as a jurisdiction in which covered bonds are a particularly important funding instrument. As such, the CBAP is set at the level of the Issuer Rating plus one notch.
-- A legal and structuring framework (LSF) assessment of "Very Strong" associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of A (low), which is the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-L of AA.
-- A two-notch uplift for high recovery prospects.
-- A level of overcollateralisation (OC) of 38% which is considered persistent based on historically observed levels and information from the Issuer. Morningstar DBRS gives full credit to such level in accordance with its principal methodology. Such level is not subject to a haircut as Morningstar DBRS considers it to be persistent based on historically observed levels.
-- The sovereign rating of the Kingdom of Spain, rated A (high) with a Stable trend by Morningstar DBRS, as of the date of this rating action.

Morningstar DBRS analysed the transaction using its European Covered Bond Cash Flow tool. The main assumptions focused on the timing of defaults and recoveries of the assets, interest rate stresses, and market value spreads to calculate liquidation values on the cover pool (CP).

Everything else being equal, the CH ratings would be downgraded if any of the following were to occur: (1) the CPCA were downgraded below A (low); (2) the sovereign rating of the Kingdom of Spain was downgraded below A (low); (3) the LSF assessment associated with the Programme was downgraded to Average; (4) the quality of the CP and the level of OC were no longer sufficient to support a two-notch uplift for high recovery prospects; (5) the relative amortisation profile of the CH and CP moved adversely; or (6) volatility in the financial markets were to cause the currently estimated market value spreads to increase.

The total amount of CH currently outstanding under the programme is EUR 1.7 billion. As at 31 March 2025, the aggregate balance of the mortgages in the CP was EUR 2.2 billion, while the assets in the CP amounted to 2.3 billion. This resulted in a total estimated OC of 41.5%.

As of March 2025, the registered CP comprised residential mortgage loans with a weighted-average current unindexed loan-to-value ratio of 57.8%. The pool is concentrated in Andalusia (98.5%), Cajasur's main area of business activity. The pool has a seasoning of 6.4 years.

Around 57% of the mortgages included in the CP pay a fixed rate, while 9.3% of the liabilities pay a fixed coupon. As is usual in Spanish CH, there are no swaps for the benefit of the CH holders. This has been accounted for in Morningstar DBRS's cash flow analysis.

The Morningstar DBRS-calculated weighted-average life of the assets is 12.8 years, while that of the covered bonds is 1.5 years. The resulting asset-liability maturity mismatch is mitigated by the available OC.

All assets and liabilities are denominated in euros. As such, investors are not currently exposed to any foreign-exchange risk.

Morningstar DBRS has assessed the LSF related to the Programme as "Very Strong" according to its rating methodology. For more information, please refer to the Morningstar DBRS's "Spanish Mortgage Covered Bonds: Legal and Structuring Framework Review" commentary, which is available at www.dbrsmorningstar.com.

For further information on the Programme, please refer to the rating report at www.dbrsmorningstar.com.

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, AND GOVERNANCE CONSIDERATIONS
Credit rating actions on the Issuer are likely to have an impact on this credit rating.
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 Factors in Credit Ratings at: https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in Euros unless otherwise noted.

The principal methodology applicable to the credit rating is Global Methodology for Rating and Monitoring Covered Bonds (25 March 2025) https://dbrs.morningstar.com/research/450542.

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 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 CP stratification tables as at 31 March 2025.

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 not 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 transaction took place on 2 July 2024, when Morningstar DBRS confirmed its rating on the CH ES0413464027 at AA (high).

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

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: Marcos Meier, Assistant Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 19 July 2019

DBRS Ratings GmbH, Sucursal en España
Paseo de la Castellana 81, Plantas 26 & 27
28046 Madrid, Spain
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
Neue Mainzer Straße 75
D-60311 Frankfurt am Main
Tel. +49 (69) 8088 3500
Geschäftsführung: Detlef Scholz, Marta Zurita Bermejo
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.

-- Global Methodology for Rating and Monitoring Covered Bonds (25 March 2025)
https://dbrs.morningstar.com/research/450542
-- Global Methodology for Rating Banks and Banking Organisations (23 May 2025)
https://dbrs.morningstar.com/research/454637
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024)
https://dbrs.morningstar.com/research/443196
-- European RMBS Insight Methodology (8 May 2025) and European RMBS Insight model v.10.1.0.1
https://dbrs.morningstar.com/research/453613
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024)
https://dbrs.morningstar.com/research/439913
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024)
https://dbrs.morningstar.com/research/439571
-- Global Methodology for Rating Sovereign Governments (15 July 2024)
https://dbrs.morningstar.com/research/436000
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May 2025)
https://dbrs.morningstar.com/research/454196

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/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.