DBRS Morningstar Confirms and Upgrades Ratings on Two CaixaBank RMBS Transactions

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by two CaixaBank RMBS transactions:

CaixaBank RMBS 1, FT

-- Class A Notes confirmed at A (sf)
-- Class B Notes upgraded to BB (high) (sf) from BB (sf)

CaixaBank RMBS 2, FT

-- Class A Notes confirmed at A (sf)
-- Class B Notes upgraded to BB (high) (sf) from BB (sf)

The ratings on the Class A Notes address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date of each transaction. The ratings on the Class B Notes address the ultimate payment of interest and principal on or before the legal final maturity date of each transaction.

The rating actions follow an annual review of the transactions and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies and defaults.
-- Updated portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the outstanding collateral pools.
-- The credit enhancement (CE) available to the notes to cover the expected losses at their respective rating levels.

CaixaBank RMBS 1, FT and CaixaBank RMBS 2, FT are securitisations of first-lien residential mortgage loans and first-lien multi-credito (drawn credit lines) mortgages on properties in Spain originated and serviced by CaixaBank, S.A. (CaixaBank), that closed in February 2016 and March 2017, respectively.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
The performance of both transactions remains within DBRS Morningstar’s expectations.

CaixaBank RMBS 1, FT: As of the December 2019 payment date, loans more than 90 days in arrears represented 1.3% of the outstanding performing portfolio collateral balance (compared with 1.4% in December 2018). The cumulative default ratio was at 0.8% of the original portfolio balance (compared with 0.5% in December 2018). DBRS Morningstar conducted a loan-by-loan analysis on the remaining receivables and updated its base case PD and LGD assumptions to 5.7% and 25.6%, respectively.

CaixaBank RMBS 2, FT: As of the January 2020 payment date, loans more than 90 days in arrears represented 1.4% of the outstanding performing portfolio collateral balance (compared with 1.3% in January 2019). The cumulative default ratio was at 0.6% of the original portfolio balance (compared with 0.2% in January 2019). DBRS Morningstar conducted a loan-by-loan analysis on the remaining receivables and updated its base case PD and LGD assumptions to 7.3% and 18.7%, respectively.

CREDIT ENHANCEMENT
CaixaBank RMBS 1, FT: As of the December 2019 payment date, CE to the Class A Notes was 17.5%, up from 16.2% last year. The Class A Notes benefit from a reserve fund, which provides liquidity support and credit support to the Class A Notes. After the first two years from closing, the reserve fund may amortise over the life of the transaction subject to certain amortisation triggers. The reserve fund is currently at its target level of EUR 568.0 million (the minimum of 8.0% of the outstanding balance of the rated notes and 4.0% of their initial balance, subject to a floor of 2.0% of that initial balance).

CaixaBank RMBS 2, FT: As of the January 2020 payment date, credit enhancement to the Class A Notes was 17.9%, up from 16.6% last year. The Class A Notes benefit from a reserve fund, which provides liquidity support and credit support to the Class A Notes. After the first two years from closing, the reserve fund may amortise over the life of the transaction subject to certain amortisation triggers. The reserve fund is currently at its target level of EUR 129.2 million (the minimum of 6.0% of the outstanding balance of the rated notes and 4.75% of their initial balance).

The only available subordination for the Class B Notes is the reserve fund, which currently covers principal and interest payments on the Class A Notes only. However, upon payment in full of the Class A Notes, the reserve fund will also become available for the Class B Notes in each transaction.

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

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology”.

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 action.

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

These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

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 Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at:
https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include reports and information provided by the Management Company, CaixaBank Titulización, S.G.F.T., S.A.U., and 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 actions on these transactions took place on 1 March 2019, when DBRS Morningstar confirmed its ratings at A (sf) on the Class A Notes of both transactions, and upgraded its ratings on the Class B Notes to BB (sf) from C (sf) for CaixaBank RMBS 1, FT and to BB (sf) from B (high) (sf) for CaixaBank RMBS 2, FT.

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

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the ratings (the Base Case):

CaixaBank RMBS 1, FT:
-- 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.
-- The base case PD and LGD of the current pool of loans for the Issuer are 5.7% and 25.6%, 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 Series A notes would be expected to remain at A (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Series A would be expected to remain at A (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Series A would be expected to fall to A (low) (sf).

Class A Notes 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 A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected 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 rating of BB (high) (sf)
-- 50% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD, expected rating of BB (high)(sf)
-- 50% increase in PD, expected rating of BB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)

CaixaBank RMBS 2, FT:
-- 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.
-- The base case PD and LGD of the current pool of loans for the Issuer are 7.3% and 18.7%, 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 Class A Notes would be expected to remain at A (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to A (low) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to BBB (high) (sf).

Class A Notes 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 A (low) (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)

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

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.

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

CaixaBank RMBS 1, FT:
Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 23 February 2016

CaixaBank RMBS 2, FT:
Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 20 March 2017

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Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Interest Rate Stresses for European Structured Finance Transactions

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

For more information on these credits or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.