OREANDA-NEWS. Fitch Rating has upgraded SC Poland 2014-1's class B notes and affirmed the class A notes, as follows:

PLN222.6m class A notes (ISIN: XS1070423931): affirmed at 'AA'sf; Outlook Stable
PLN209.0m class B notes (ISIN: XS1079309651): upgraded to 'AA'sf from 'A'sf; Outlook Stable

The transaction is a static securitisation of auto loans and hire purchase agreements originated in Poland by Santander Consumer Bank, S.A. (SCB), which is ultimately owned by its Spanish parent Banco Santander S.A. (A-/Stable/F2).

KEY RATING DRIVERS
The rating actions reflect the substantial build-up in credit enhancement (CE) and the transaction's positive performance since closing. The gross cumulative default ratio stood at 0.38% as at end-May 2015, while the reported loss rate to date was 0.37%. Reported recoveries have so far been limited due to the long recovery lag, especially for auto loans. Accounts delinquent for more than 30 days made up 0.22% of the current portfolio balance. Combined with the stable economic outlook for Poland, this means that Fitch expects the good asset performance to continue.

The portfolio had amortised to PLN816.2m by May 2015, from the original amount of PLN1,751.3m in June 2014. The transaction does not benefit from a swap agreement to hedge any potential mismatch between the interest collections received from the assets and the interest payable on the rated Wibor-linked notes. The portfolio composition has increasingly weighted towards fully amortising, floating rate auto loans. This is because hire purchase loans and bullet auto loans which are typically fixed rate amortised significantly faster.

The proceeds from pool amortisation have been used to redeem the class A notes. This has resulted in an increase in CE for the class A notes to 75.2% from 35.4% and to 49.5% from 23.5% for the class B notes. The high CE is the main driver of the upgrade of the class B notes to 'AAsf', the highest rating achievable by a Polish structured finance transaction.

Commingling risk is limited through a daily sweep of collections and a trigger to redirect borrower payments in case of the parent's rating falling below 'BBB-'. However, residual commingling risk remains and there is no commingling reserve. Fitch has analysed the potential commingling loss and believes that both the class A and B notes would be adequately protected against commingling risk by CE.

No back-up servicer was appointed at closing. Should a servicer replacement become necessary, Banco Santander S.A., acting as the BUS facilitator, would assist the issuer in appointing a new servicer in time. In addition, a fully funded liquidity reserve fund would cover the amounts due to pay senior expenses and note interest on the immediate payment date.

Given the robust asset performance and advanced amortisation of the pool, Fitch has maintained its default base case for the outstanding portfolio at 5.28%. While the underlying pool is now weighted towards auto loans, which are typically considered as less creditworthy than hire purchase loans, this effect is offset by the better than expected performance and an increase proportion of new car finances which have a better credit quality than used car loans. The revised lifetime default rate has been reduced to 2.85%, taking the low observed defaults and losses to date into account. The recovery rate base case remains unchanged at 35.0%.

RATING SENSITIVITIES
Current Rating class A: 'AAsf'
Current Rating class B: 'Asf'
Increase base case defaults by 25%; decrease recoveries by 25% for class A: 'AAsf'
Increase base case defaults by 25%; decrease recoveries by 25% for class B: 'AAsf'

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of Santander consumer Bank S.A. (Poland)'s origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.