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Rating Action:

Moody's assigns provisional ratings to CAIXABANK CONSUMO 5, FONDO DE TITULIZACION

18 Jun 2020

EUR [ ] million ABS Notes rated, relating to a portfolio of Spanish consumer loans

Madrid, June 18, 2020 -- Moody's Investors Service ("Moody's") has assigned the following provisional ratings to Notes to be issued by CAIXABANK CONSUMO 5, FONDO DE TITULIZACION (the "Issuer"):

....EUR [ ] million Series A Fixed Rate Asset Backed Notes due October 2054, Assigned (P)Aa3 (sf)

....EUR [ ] million Series B Fixed Rate Asset Backed Notes due October 2054, Assigned (P)B1 (sf)

RATINGS RATIONALE

The transaction is a static cash securitisation of unsecured consumer loans extended to obligors in Spain by CaixaBank, S.A., (Baa1 Senior Unsecured/P-2, A3(cr)/P-2(cr), A3 LT bank deposits). The loans are used for several purposes, such as general consumer purposes, interior decoration and property improvement and auto-related loans such as acquisition and maintenance. CaixaBank, S.A. also acts as asset servicer, collection account bank, calculation agent and paying agent of the transaction.

The provisional portfolio of underlying assets consists of unsecured consumer loans originated in Spain, with fixed rates and a total outstanding balance of approximately € 3.715 million. The final portfolio will be selected at random from the provisional portfolio to match the final Note issuance amount.

As at 25 May 2020, the provisional pool cut had 650,694 loans with a weighted average seasoning of 12.6 months. Loans are used for the purpose of interior decoration and property improvement (28.6%), car acquisition or repair (18.9%), and other undefined or general purposes. The transaction benefits from credit strengths such as the extensive historical data provided, high excess spread, no interest rate risk and the financial strength and securitisation experience of the originator.

Our analysis has considered the increased uncertainty relating to the effect of the coronavirus outbreak on the Spanish economy as well as the effects that the announced government measures put in place to contain the virus, will have on the performance of consumer assets. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. It is a global health shock, which makes it extremely difficult to provide an economic assessment. The degree of uncertainty around our forecasts is unusually high.

Moreover, Moody's notes that the transaction features some credit weaknesses such as (i) around 46.7% of the portfolio is composed of pre-approved loans where the borrower was offered an unsecured consumer, initially not requested by the borrower and available to the borrower any time later on, (ii) the portfolio has 2.07% of bullet loans, (iii) the pool is concentrated in the region of Cataluña 31.53% (iv) there is a high degree of linkage to CaixaBank, S.A. in the transaction and (v) 0.28% of the loans in the provisional pool are up to 30 days delinquent and 0.32% are more than 30 days delinquent.

Moody's analysis focused, amongst other factors, on (i) an evaluation of the underlying portfolio of consumer loans and the eligibility criteria; (ii) historical performance provided on CaixaBank, S.A's. total book and past consumer loan ABS transactions; (iii) the credit enhancement provided by subordination, excess spread and the reserve fund; (iv) the static structure of the transaction; (v) the liquidity support available in the transaction by way of principal to pay interest; and (vi) the overall legal and structural integrity of the transaction.

MAIN MODEL ASSUMPTIONS

Moody's determined a portfolio lifetime expected mean default rate of 6.75%, expected recoveries of 15.0% and a portfolio credit enhancement ("PCE") of 19.0% for the current portfolio of the issuer. The expected defaults and recoveries capture our expectations of performance considering the current economic outlook, while the PCE captures the loss we expect the portfolio to suffer in the event of a severe recession scenario. Expected defaults and PCE are parameters used by Moody's to calibrate its lognormal portfolio loss distribution curve and to associate a probability with each potential future loss scenario in its ABSROM cash flow model to rate consumer ABS transactions.

The portfolio expected mean default rate of 6.75% is in line with that of Spanish consumer loans and is based on our assessment of the lifetime expectation for the pool, taking into account (1) the historical performance of the loan book of the originator, (2) the benchmark loan transactions, and (3) other qualitative considerations.

We stressed the results from the historical data analysis to account for (1) the rising trend of defaults on preapproved loans, (2) the differences between the historical data provided and the transaction default definition, (3) the expected outlook for the Spanish economy in the medium term, and (4) the volatile European economic environment.

Portfolio expected recoveries of 15% are in line with Spanish consumer loans and are based on (1) the historical recovery vintages received for this transaction, (2) the benchmarks from other Spanish consumer loans, and (3) other qualitative and pool-derived aspects.

The PCE of 19.0% is in line with the Spanish consumer loans average. The PCE has been defined following an analysis of data variability, as well as by benchmarking this portfolio with past and similar transactions. Factors that affect the potential variability of a pool's credit losses are (1) historical data variability; (2) quantity, quality and relevance of the historical performance data; (3) originator quality; (4) servicer quality; (5) certain pool characteristics, such as asset concentration and loan characteristics; and (6) certain structural features.

METHODOLOGY

The principal methodology used in these ratings was " Moody's Approach to Rating Consumer Loan-Backed ABS " published in March 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1112199. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:

Factors or circumstances that could lead to an upgrade of the ratings of the Notes would be (1) better than expected performance of the underlying collateral; (2) significant improvement in the credit quality of CaixaBank, S.A.; or (3) a lowering of Spain's sovereign risk leading to the removal of the local currency ceiling cap.

Factors or circumstances that could lead to a downgrade of the ratings would be (1) worse than expected performance of the underlying collateral; (2) deterioration in the credit quality of CaixaBank, S.A.; or (3) an increase in Spain's sovereign risk.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to one of the credit rating outcomes announced and described above.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Rodrigo Conde
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Armin Krapf
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

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