DBRS Upgrades BBVA Portugal RMBS No. 1

DBRS Ratings Limited (DBRS) has today upgraded the rating on the Class A notes issued by TAGUS – SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (BBVA Portugal RMBS No. 1 or the Issuer) to A (high) (sf) from A (sf). The rating addresses the timely payment of interest and ultimate payment of principal by the legal final maturity date.

The upgrade follows an annual review of the transaction and is based on the following analytical considerations as described more fully below:
-- Portfolio performance in terms of delinquencies, defaults and losses.
-- Default, recovery and loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Class A notes to cover the expected loss at the A (high) (sf) rating level.

BBVA Portugal RMBS No. 1 is a securitisation of Portuguese residential mortgages originated by Banco Bilbao Vizcaya Argentaria (Portugal) S.A. (BBVA Portugal). The mortgage portfolio is serviced by BBVA Portugal with Banco Bilbao Vizcaya Argentaria S.A. acting as the backup servicer.

PORTFOLIO PERFORMANCE
As of the March 2017 payment date, two- to three-month arrears were 0.00% and the 90+ delinquency ratio was 0.07%. The cumulative default ratio was at zero.

CREDIT ENHANCEMENT
As of March 2017, credit enhancement to the Class A notes was 11.95%, up from 10.81% at the time of DBRS’s initial rating. Credit enhancement to the Class A notes consists of subordination of the Class B notes and a General Reserve.

Citibank N.A., London Branch (Citibank) acts as the Issuer Account Bank for the transaction. The DBRS private rating of Citibank complies with the Minimum Institution Rating, given the rating assigned to the Class A notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology.” DBRS 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 these transactions 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 DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” at: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries.

The sources of data and information used for this rating include reports and loan-level data provided by Deutsche Bank AG, London Branch (the Transaction Manager) and European DataWarehouse GmbH.

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

At the time of the initial rating DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 29 July 2016 when DBRS removed the Under Review with Positive Implications (UR-Pos.) status and confirmed the rating of the Class A notes at A (sf). The rating on the Class A notes was previously placed UR-Pos. as a result of the publication of DBRS’s updated “Legal Criteria for European Structured Finance Transactions” methodology on 19 February 2016.

Information regarding DBRS 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 considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

-- DBRS expected a lifetime base-case probability of default (PD) and loss given default (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.
-- The base-case PD and LGD of the current pool of loans for the Issuer are 6.92% and 14.26%, 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. For example, if the LGD increases by 50%, the rating of the Class A notes would be expected to fall to A (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A notes would be expected to remain at A (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to fall to BBB (sf).

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

For further information on DBRS historic 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 Limited are subject to EU regulations only.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 31 December 2015

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

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

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