Fitch Assigns Caixabank Consumo 2 Expected Ratings
EUR1,170m Class A: 'A(EXP)sf'; Outlook Stable
EUR130m Class B: 'B+(EXP)sf'; Outlook Stable
This transaction is a securitisation of unsecured loans and real estate-secured consumer loans. All the loans are originated and serviced by CaixaBank (BBB/Positive/F2), which is also the account bank counterparty.
Final ratings are contingent on the receipt of final documentation conforming to information already received.
KEY RATING DRIVERS
Mixed Risk and Dual Criteria Approach
The collateral is comprised of two product types: unsecured consumer loans (around 75%) and real estate (RE) secured consumer loans (around 25%). The RE secured consumer loans have a weighted remaining life to maturity of 16 years and the unsecured portion of the collateral is shorter with a weighted remaining life to maturity of four years.
The agency used its Global Consumer ABS Criteria to analyse unsecured consumer loans granted to individuals and its EMEA RMBS Rating Criteria complemented by Criteria Addendum: Spain - Residential Mortgage Assumptions to analyse the remaining portfolio.
Limited Credit Losses
Fitch has analysed the unsecured portfolio's credit risks and formed a base case default expectation of 4.5% and a recovery rate expectation of 30% for the lifetime of the portfolio. These base cases were derived based on historical data provided by CaixaBank, dating back to 2006.
Fitch's lifetime default base case and recoveries expectations for RE secured consumer loans are 10.6% and 43.8% respectively, derived from its proprietary Spanish RMBS default model (ResiGlobal), which is based on the criteria for analysing securities backed by Spanish residential mortgage loans.
Counterparty Dependency Caps Rating
CaixaBank acts as originator, servicer, bank account provider and paying agent. CaixaBank's rating sufficiently mitigates payment interruption risk for a note rating up to 'Asf' category. CaixaBank will post a reserve upon the loss of a 'BBB' rating to address commingling risk.
The rating of the notes is capped at 'A+sf', one notch higher than the initial rating of the senior notes, as the rating trigger upon which the account bank would be is set at 'BBB'.
Interest Rate Risk
The transaction is exposed to interest rate risk as a relevant portion of the assets (around 72%) pay fixed interest rate while both class A and B pay a floating coupon. Fitch found that notes were able to withstand an increasing interest rate stress commensurate with their rating derived in accordance with Fitch's criteria for interest rate stresses in structured finance.
The impact of increasing interest rates is mitigated by the high interest rate of fixed paying loans (around 9%), which makes excess spread available at the beginning of the life of the transaction even under an increasing interest rate scenario and the fact that RE secured consumer loans (the ones with the longest time to maturity) are majorly floating, thereby reducing the potential mismatch at the end of the life of the deal.
Rating sensitivity to increased default rate assumptions (class A/ class B)
Current rating: 'Asf' / 'B+sf'
Increase in default rate by 15: 'A-sf' / 'B-sf'
Increase in default rate by 30%: 'BBB+sf' / 'CCCsf'
Increase in default rate by 45%: 'BBBsf' / 'CCsf' or below
Rating sensitivity to reduced recovery rate assumptions (class A/ class B)
Current rating: 'Asf' / 'B+sf'
Decrease in recovery rate by 15: 'Asf' / 'B-sf'
Decrease in recovery rate by 30%: 'A-sf' / 'B-sf'
Decrease in recovery by 45%: 'A-sf' / 'CCCsf'
Rating sensitivity to multiple factors (class A/ class B)
Current rating: 'Asf'/'B+sf'
Increase in default rate by 15%, decrease in recovery rate by 15%: 'BBB+sf' / 'CCCsf'
Increase in default rate by 30%, decrease in recovery rate by 30%: 'BBBsf' / 'CCsf'' or below
Increase in default rate by 45%, decrease in recovery rate by 45%: 'BBB-sf' / 'CCsf'' or below
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated one error related to the loan formalisation information. This finding was immaterial to this analysis, as set out more fully in the new issue report. In addition, the loan affected by the finding was excluded from the securitised pool as described in the transaction prospectus
Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
-Loan-by-loan data provided by CaixaBank as of 23 May 2016
-Historical performance data provided by Caixabank up to December 2015
REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class will be available by accessing the appendix that will accompany the new issue report. In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 2 March 2016 available on the Fitch website.
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