Press Release

DBRS Morningstar Confirms Ratings on Claris RMBS 2014 S.r.l. and Claris RMBS 2016 S.r.l.

RMBS
January 24, 2020

DBRS Ratings GmbH (DBRS Morningstar) confirmed the following ratings on Claris RMBS 2014 S.r.l. (Claris RMBS 2014) and Claris RMBS 2016 S.r.l. (Claris RMBS 2016) transactions:

Claris RMBS 2014:
-- Class A2 Notes at AAA (sf)

Claris RMBS 2016:
-- Class A Notes at AAA (sf)
-- Class B Notes at A (high) (sf)

For Claris RMBS 2014, the rating on the Class A2 Notes addresses the timely payments of interest and ultimate payment of principal on or before the final maturity date in December 2061.

For Claris RMBS 2016, the rating on the Class A Notes addresses the timely payments of interest and ultimate payment of principal, whereas the rating on the Class B Notes addresses the ultimate payment of interest and principal on or before the final maturity date in October 2068, in accordance with the transaction documentation.

The confirmations follow an annual review of the transactions and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies and defaults, as of the December 2019 payment date for Claris RMBS 2014 and the October 2019 payment date for Claris RMBS 2016;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions for the outstanding collateral pools;
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels.

Claris RMBS 2014 and Claris RMBS 2016 are two securitisations of mortgage loans initially originated by Veneto Banca S.p.A. (VB) and Banca Apulia S.p.A. (BAP), which is part of the Veneto Banca banking group. Effective from 26 June 2017, following VB`s liquidation, the servicing and operating activities of these transactions have been transferred with no disruption to Intesa Sanpaolo S.p.A. Please refer to DBRS Morningstar’s commentary “No Disruption in Servicing Activities of BPVi and VB Securitisations” for more information.

PORTFOLIO PERFORMANCE
Both portfolios are performing within DBRS Morningstar’s initial expectations. For Claris RMBS 2014, as of December 2019, loans that were two to three months in arrears represented 0.8% of the collateral balance, unchanged from December 2018. The 90+ delinquency ratio was 2.2%, down from 2.9% in December 2018. The gross cumulative default ratio stood at 5.2% of the initial portfolio balance, up from 4.7% in December 2018.
For Claris RMBS 2016, as of October 2019, loans that were two to three months in arrears represented 0.8% of the collateral balance, down from 1.2% as of October 2018. The 90+ delinquency ratio was 1.8%, down from 2.4% in October 2018. The gross cumulative default ratio stood at 2.3% of the initial portfolio balance, up from 1.4% in October 2018.

PORTFOLIO ASSUMPTIONS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions. For Claris RMBS 2014, the base-case PD and LGD are 6.3% and 1.6 %, respectively, while for Claris RMBS 2016 the base-case PD and LGD are 7.4% and 7.1%, respectively.

CREDIT ENHANCEMENT
For both transactions, overcollateralisation of the outstanding collateral portfolio provides credit enhancement and does not include the cash reserve. For Claris RMBS 2014, as of December 2019, credit enhancement to the Class A2 Notes was 55.7%, up from 43.7% as of December 2018. For Claris RMBS 2016, as of October 2019, credit enhancement to the Class A and Class B Notes was 33.0% and 18.1%, respectively, increasing from 27.7% and 14.9% as of October 2018.

The cash reserve fund of each transaction is available to pay senior fees, expenses, and missed interest payments on the Class A2 Notes for Claris RMBS 2014, and only on the Class A Notes for Claris RMBS 2016. The reserves are currently at their target levels of EUR 10.6 million (1.5% of the outstanding balance of the Class A1 and Class A2 Notes at closing) for Claris RMBS 2014, and EUR 16.6 million (3.0% of the outstanding balance of the Class A Notes at the preceding payment date) for Claris RMBS 2016.

The Bank of New York Mellon S.A./N.V., Milan Branch and The Bank of New York Mellon S.A./N.V., London Branch are the Italian and English account banks, respectively, for Claris RMBS 2014. Based on the reference ratings of The Bank of New York Mellon S.A./N.V., Milan Branch and The Bank of New York Mellon S.A./N.V, London Branch, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS Morningstar considers the risk arising from the exposure to the Italian account bank and the English account bank to be consistent with the rating assigned to the Class A2 Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

BNP Paribas Securities Services, Milan Branch acts as the account bank for Claris RMBS 2016. Based on the private rating of BNP Paribas Securities Services, Milan Branch, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A Notes and the Class B Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

J.P. Morgan Securities plc and Natixis S.A., London branch act as the swap counterparties of Claris RMBS 2014, whereas J.P. Morgan Securities plc is the only swap counterparty of Claris RMBS 2016. DBRS Morningstar’s private ratings of J.P. Morgan Securities plc and Natixis S.A. comply with the first rating threshold, as described in DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the rating assigned to the Notes. Obligations under the swap agreements are guaranteed by J.P. Morgan Chase Bank N.A.

The rating on the Class B Notes at A (high) (sf) materially deviates from the higher rating implied by the quantitative model. DBRS Morningstar considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by a quantitative model that is a substantial component of a rating methodology; in this case, the rating addresses the ultimate payment of interest and principal on or before the final maturity date as defined in the transaction legal documents. DBRS Morningstar typically expects bonds rated in the AA category to be able pay interest at the time they are the most senior bond in the transaction.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology”.

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

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 Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for the ratings include servicer reports provided by Intesa Sanpaolo S.p.A., investors reports provided by The Bank of New York Mellon for Claris RMBS 2014, payments and investors reports provided by Securitisation Services S.p.A. for Claris RMBS 2016, and loan-by-loan level data provided by the European DataWarehouse GmbH.

DBRS Morningstar did not rely upon third-party due diligence to conduct its analysis.

For Claris RMBS 2014, at the time of the initial rating, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

For Claris RMBS 2016, at the time of the initial rating, DBRS Morningstar was 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.

The last rating actions on Claris RMBS 2014 took place on 24 January 2019 and on 23 July 2019 when DBRS Morningstar confirmed the rating on the Class A2 Notes at AAA (sf) and discontinued the AAA (sf) rating on the Class A1 Notes, respectively.

The last rating action on Claris RMBS 2016 took place on 24 January 2019, when DBRS Morningstar confirmed the ratings on the Class A Notes and Class B Notes at AAA (sf) and A (high) (sf), respectively.

The lead analyst responsibilities for both transactions have been transferred to Daniele Canestrari.

Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies is available at www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- DBRS Morningstar expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.

-- For Claris RMBS 2014, the Base Case PD and LGD of the pool of mortgages are 6.3% and 1.6%, respectively.
-- For Claris RMBS 2016, the Base Case PD and LGD of the pool of mortgages are 7.4% and 7.1%, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. Taking Claris RMBS 2014 as an example, if the LGD increased by 50%, the rating of the Class A2 Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increased by 50%, the rating for the Class A2 Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increased by 50%, the rating of the Class A2 Notes would be expected to remain at AAA (sf).

Claris RMBS 2014:

Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD, expected rating of AAA (sf).
-- 50% increase in PD, expected rating of AAA (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf).

Claris RMBS 2016:

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD, expected rating of AAA (sf).
-- 50% increase in PD, expected rating of AA (high) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf).

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf).
-- 50% increase in LGD, expected rating of A (high) (sf).
-- 25% increase in PD, expected rating of A (high) (sf).
-- 50% increase in PD, expected rating of A (high) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf).

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

Lead Analyst: Daniele Canestrari, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date Claris RMBS 2014: 31 March 2014
Initial Rating Date Claris RMBS 2016: 24 January 2017

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Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of the transactions can be found at: http://www.dbrs.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions

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

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

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