DBRS Morningstar Assigns AAA Rating to CaixaBank S.A. Covered Bonds New Issuance

DBRS Ratings GmbH (DBRS Morningstar) assigned a AAA rating to a new series of covered bonds issued by CaixaBank S.A. (CaixaBank or the Issuer) under the CaixaBank Covered Bonds (Cédulas Hipotecarias or CH) programme (the Programme). The new CH is a EUR 100 million tap issuance of the existing Series 26 (CH - ES0440609339), a fixed-rate covered bond (CB) that pays a coupon of 1.25% and matures on 11 January 2027. Series 26 was issued on 11 January 2017 with a nominal amount of EUR 1.5 billion.

At the same time, DBRS Morningstar discontinued its ratings on CH - ES0440609313 and CH - ES0413307127, which have matured, and CH - ES0440609354, which the Issuer amortised early.

All CBs issued under the Programme rank pari passu with each other and DBRS Morningstar currently rates them AAA.

The rating is based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of AA (low), which is CaixaBank’s Long Term Critical Obligations Rating. CaixaBank is the Issuer and Reference Entity for the Programme.
-- A Legal and Structuring Framework (LSF) Assessment of “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 (high).
-- A one-notch uplift for high recovery prospects.
-- A level of overcollateralisation (OC) of 54.1% to which DBRS Morningstar gives credit, which is the minimum level observed in the last 12 months adjusted by a scaling factor of 0.85.
-- The sovereign rating of the Kingdom of Spain, rated “A” with a Stable trend by DBRS Morningstar, as of the date of this press release.

DBRS Morningstar analysed the transaction with 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, a one-notch downgrade of the CBAP would lead to a one-notch downgrade of the LSF-L, resulting in a one-notch downgrade of the CB ratings. In addition, all else unchanged, the CH ratings would be downgraded if any of the following occurred: (1) the CPCA was 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; (4) the quality of the CP and the level of OC were no longer sufficient to support a one-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 caused the currently estimated market value spreads to increase.

The total outstanding amount of CH under the Programme is currently EUR 60.4 billion, of which DBRS Morningstar publicly rates EUR 35.0 billion. As of March 2023, the total outstanding amount of CH under the Programme was EUR 53.8 billion, while the assets in the CP amounted to EUR 105.8 billion. This resulted in a total estimated OC of 96.7%.

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

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS

Credit rating actions on CaixaBank 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 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 euros unless otherwise noted.

The principal methodology applicable to the rating is: Global Methodology for Rating and Monitoring Covered Bonds (8 May 2023) https://www.dbrsmorningstar.com/research/413651/global-methodology-for-rating-and-monitoring-covered-bonds.

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

In DBRS Morningstar’s opinion, the changes under consideration do not require the application of the entire principal methodology. Therefore, DBRS Morningstar focused on the cash flow analysis.

A review of the transaction legal documents was limited to the documentation pertaining to the tap issuance of CH - ES0440609339. All the other documents have remained unchanged since the most recent rating action.

In DBRS Morningstar’s opinion, a discontinued-repaid rating action does not warrant the application of the entire principal methodology, as the bond has been repaid in full.

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 Morningstar Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://www.dbrsmorningstar.com/research/401817/global-methodology-for-rating-sovereign-governments.

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/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these rating include CP stratification tables provided by the Issuer as at 31 March 2023.

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 not 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 this rating 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.

This rating concerns a newly issued financial instrument. This is the first DBRS Morningstar rating on this financial instrument.

The last rating action on this transaction took place on 13 January 2023, when DBRS Morningstar confirmed its AAA ratings on the outstanding CH under the Programme.

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

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Tomas Rodriguez-Vigil Junco, Vice President, Credit Ratings
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 20 January 2016

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
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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

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

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

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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