DBRS Morningstar Confirms Ratings of Master Credit Card Trust II

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following outstanding notes (the Notes) issued by Master Credit Card Trust II (the Trust). The confirmation is part of DBRS Morningstar’s continued effort to provide timely credit rating opinions and increased transparency to market participants.

-- Credit Card Receivables-Backed Class A Notes, Series 2022-3 at AAA (sf)
-- Credit Card Receivables-Backed Class B Notes, Series 2022-3 at AA (sf)
-- Credit Card Receivables-Backed Class C Notes, Series 2022-3 at BBB (sf)

The rating confirmations are based on the following factors as of June 2022:

(1) The Notes benefit from excess spread, which has ranged between 22.1% and 22.5% in the past four months (Series 2022-3 was issued in March 2022), and series-specific cash accounts that could build up to 5.0% of the initial or Maximum Allocated Amount, as applicable. For the AAA (sf)-rated notes and the AA (sf)-rated notes, credit enhancement is also available through subordination of at least 5.5% and 3.5%, respectively.

(2) The principal payment rate increased to 59.7% as of June 2022 compared with 58.2% in June 2021. The rate has averaged 57.7% over the last 12 months. Gross yields also increased marginally to 27.0% as of June 2022, compared with 26.8% in June 2021, averaging 26.8% over the last 12 months.

(3) Net losses remained stable and averaged 1.8% over the past 12 months.

(4) The Trust pool is a well-diversified and seasoned portfolio composed of certain Mastercard credit card accounts originated, managed, and designated by Bank of Montreal (BMO). BMO is the fourth-largest bank in Canada by assets and is rated AA/R-1 (high) with Stable trends by DBRS Morningstar as of June 2022.

The performance and characteristics of the Trust pool and the Notes are available and updated each month in the Monthly Canadian ABS Report available at www.dbrsmorningstar.com. DBRS Morningstar conducts monthly stress testing of each rated class of the Notes, and the results indicate that simultaneous declines in yield and payment rates and increases in losses would not result in a failure of the Trust to repay the Notes on a timely basis. The severity of the tests applied is commensurate with the respective ratings of the Notes.

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

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Master Canadian Structured Finance Surveillance Methodology (June 7, 2022), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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