OREANDA-NEWS. Fitch Ratings has affirmed Castilho Mortgages No. 1 (ISIN PTTGUPOM0016) at 'A+sf' with Stable Outlook.

The transaction is a securitisation of Portuguese mortgage loans originated and serviced by Deutsche Bank AG through its Portuguese Branch (DB Portugal, A/Negative/F1).

KEY RATING DRIVERS
Solid Performance
Over the past 12 months, loans in arrears by three months or more have remained relatively stable at 25bps of the current portfolio balance, which is well below Fitch's index for Portuguese RMBS transactions at 100bps.

Revolving Period
The transaction is in its revolving period until October 2016, during which the principal accumulation ledger is topped up by the principal repayments. At end-June 2015, the ledger had accumulated to 5.4% of the initial portfolio balance. In line with the initial analysis, the agency modelled a worst-case portfolio to test the ability of the transaction to withstand deterioration in the pool quality. The analysis showed that the credit enhancement for the tranche is sufficient to withstand these stresses.

Natural Hedge
The issuer has no external hedging arrangement for the difference in interest rate paid on the notes (three-month Euribor) and that received from the mortgage loans (three- six- and 12-month Euribor). At present the structure is generating 0.4% of excess revenue per year. To account for the absence of hedging arrangements in its analysis, Fitch has made conservative assumptions regarding the future cash flows by giving no credit to the excess spread generated by the structure. The agency has found the current credit enhancement to be sufficient to withstand the rating stresses.

RATING SENSITIVITIES
Deterioration in asset performance may result from economic factors. A corresponding increase in new defaults and associated pressure on excess spread and reserve funds, beyond Fitch's assumptions, could result in negative rating action. Furthermore, an abrupt increase of the underlying interest rates might jeopardise the loan affordability of the underlying borrowers.

The rating is also sensitive to changes in Portugal's Country Ceiling (A+) and consequently changes to the highest achievable rating of Portuguese structured finance notes.

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 Deutsche Bank'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.

Overall, Fitch's assessment of the 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 Deutsche Bank as at 1 October 2015
- Transaction reporting provided by Deutsche Bank as at 22 July 2015

REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see Tagus STC, S.A. / Castilho Mortgages No.1 - Appendix, dated xx at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.