Italian RMBS Index Report Q4 2011: Credit Performance Deteriorated, But Stayed Within Our Expectations

Transcription

1 February 17, 2012 Italian RMBS Index Report Q4 2011: Credit Performance Deteriorated, But Stayed Within Our Expectations Primary Credit Analyst: Benedetta Avesani, Milan (39) ; Secondary Contact: Andrew M Bowyer, CFA, London (44) ; andrew_bowyer@standardandpoors.com Data Analyst: Shilpi Purkayastha, Data Analyst, London (44) ; shilpi_purkayastha@standardandpoors.com Table Of Contents Related Criteria And Research 1

2 Italian RMBS Index Report Q4 2011: Credit Performance Deteriorated, But Stayed Within Our Expectations Table 1 Performance Indicators (%) Q Q Q Q Q Q Q Q Q Q Q Q Index changes Total delinquencies day delinquencies Prepayments Economic data Unemployment rate* N/A N/A N/A N/A N/A Real GDP growth* N/A N/A N/A N/A N/A N/A N/A *Istat (Istituto Nazionale di Statistica). N/A--Not available. The performance of Italian residential mortgage-backed securities (RMBS) transactions slightly worsened in Q However, the deterioration was in line with Standard & Poor's Ratings Services' expectations. Delinquencies and defaults rose slightly after stabilizing in the first half of Total delinquencies have risen slightly, to 3.09% in Q4 2011, from 2.88% in Q1 that year. Severe delinquencies (over 90 days) increased to 1.53% from 1.42% in Q We believe the weaker collateral performance reflects the weakening economies of Italy and the European Economic and Monetary Union (EMU or eurozone). However 1.53% is still lower than the peak of 1.94% recorded by the 90 plus days arrears in Q4 2009, when Italy was in recession. The prepayment rate also increased slightly to 5.58%, from 5.52% in Q the lowest level we have seen over the past five years. Overview The performance of Italian RMBS transactions slightly worsened in Q4 2011, compared with the previous quarter, with severe delinquencies increasing to 1.53% from 1.42%. Total delinquencies have slightly increased over the past year, to 3.09% in Q from 2.88% in Q The weaker collateral performance reflects the weakening economies of Italy and the eurozone, in our view. Downside risks in the eurozone's economic outlook have increased, in our view. Recent economic indicators, such as the purchasing managers indices, show that economic activity contracted in most countries during Q4 2011, and that the first quarter of 2012 is likely to be no different. In our opinion, a prolonged recession would have a particularly hard impact on countries like Spain, Portugal, and Italy. We now project flat GDP growth for the eurozone as a whole in 2012 and 1.0% growth in 2013, compared with our earlier projection of 0.4% growth in 2012 (see "Economic Research: Assessing The Severity Of The Eurozone Standard & Poors RatingsDirect on the Global Credit Portal February 17,

3 Recession Is A Close Call" published on Jan. 31, 2012). We've also further lowered our Italian GDP growth forecast for this year to minus 1.0% from 0.5% as of October 2011 in the baseline forecast of a mild recession. In our alternative forecast of a true double dip, which would have a particularly adverse effect on Italy, we would expect GDP to fall to minus 3.0% this year. We currently assign a 60% probability to our baseline forecast, versus 40% for our alternative forecast of a true double dip. The weakening of the Italian economy is also demonstrated in the unemployment rate, which increased to 8.9% in Q from 8.3% in Q3 that year. The latest figure is higher than recorded a year earlier (8.1%) and represents the peak since 2002, when unemployment reached 8.6% before falling to 6.1% in We believe that the slight increase in severe delinquencies seen in the quarter reflects flagging economic conditions, but it is still in line with our expectations. The Italian housing market's decline, which began in 2006, began to stabilize during the first half of However, it started to stumble again in the second half, with residential real estate sales dropping by 2.7% in Q and 4.1% in Q year-on-year. According to the latest quarterly report from the Ministry of Economy and Finance's "Agenzia del Territorio," after four consecutive quarters of real estate market deterioration, in Q the number of residential real estate sales was slightly up again in relative terms by 1.4% year-on-year. However, they were even lower in Q3 than they were at the same point in 2009, when the market dropped by 11% year-on-year by number of transactions. The Bank of Italy's latest survey of the real estate market in October 2011 also pointed to increasing pressure on house prices and an increasing number of outstanding listings with real estate agents. According to the Bank of Italy's latest publication, the volume of new residential mortgage loans granted to Italian families dropped by about 16% in Q3 2011, compared with the same quarter in This, in our opinion, was due to the banks' requirement of higher spreads, and the weak economy. The Italian housing market has been volatile over the past two years, but it has generally declined overall. However, the drop in the number of transactions and the pressure on housing prices has been limited, in comparison with other European countries. We do not expect the Italian housing market's decline to negatively affect Italian RMBS transactions for a number of reasons, such as: Limited decline in the property prices; Low loan-to-value ratios and fairly high seasoning generally shown by Italian portfolios backing the transactions; and The fact that our ratings have proven to be stable under moderate stress conditions, after applying haircuts to the underlying properties' valuations of up to 10%. The renegotiation scheme ("Piano Famiglie") launched in 2009 by the Association of Italian Banks (ABI) allows participating banks to grant periods when payments do not need to be made (a "payment holiday") to mortgage loan borrowers that meet certain conditions. This scheme was due to stop in January 2012, but ABI has since extended it until July According to ABI, as of Nov. 30, 2011, banks have conceded payment holidays to 7 billion worth of mortgages granted to individuals. This means that about 2.1% of loans have benefited from the renegotiation scheme, demonstrating the financial resilience of the Italian families affected and the negligible impact 3

4 of this scheme on the RMBS transactions that we have rated. We are monitoring any evolution of the takeover ratio. We rated two new transactions in Q4: Voba N. 3 S.r.l., which closed on Nov. 23, 2011, and was originated by Banca Popolare dell'alto Adige S.C.p.A. (see "New Issue: Voba N. 3 S.r.l."); and Fanes S.r.l. (Series ), which closed on Dec. 2, 2011, and was originated by Cassa di Risparmio di Bolzano SpA (see "New Issue: Fanes S.r.l."). On Dec. 21, 2011, we placed our ratings on 26 tranches in 19 Italian RMBS transactions on CreditWatch negative, following recent rating actions that involved several European banks (see "Ratings On 305 Tranches In 120 European RMBS Transactions Placed On CreditWatch Negative After Bank Rating Actions," published on Dec. 21, 2011). We consider the ratings on the Italian RMBS tranches affected to be directly linked to the ratings on the banks acting as counterparties in these transactions, as per our 2010 counterparty criteria (see "Counterparty and Supporting Obligations Methodology and Assumptions," published on Dec. 2, 2010). On Jan. 13, 2012, we lowered our unsolicited long-term rating on the Republic of Italy to 'BBB+' from 'A' (see "Italy's Unsolicited Ratings Lowered To 'BBB+/A-2'; Outlook Negative"). As a result, on Jan. 23, 2012, we lowered all of our 'AAA (sf)' ratings on Italian structured finance securities to 'AA+ (sf)'. According to our EMU criteria, six notches is the maximum permissible uplift between the unsolicited rating on the Republic of Italy and those specific structured finance transaction ratings (see "Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions," published on June 14, 2011, and "Various Rating Actions Taken On 340 European Structured Finance Tranches After Eurozone Sovereign Rating Actions," published on Jan. 23, 2012). We do not anticipate any downward rating actions driven by performance reasons in the coming months. Even though the performance of Italian RMBS transactions slightly worsened in Q compared with Q3, the deterioration has been in line with our expectations. Likewise, the decline in the housing market is limited and still within our tested assumptions. We will monitor the weakening collateral performance and the decline of the Italian housing market in our surveillance process of Italian RMBS transactions. Once we have reviewed the affected transactions, we will resolve the Italian RMBS CreditWatch placements of Dec. 21, Table 2 Italian RMBS Transactions To Which We Assigned A Second Rating In 2011 Rating date Originator Issuer Size (mil. ) Ratings on all classes at issuance Feb 23, 2011 Veneto Banca SpA and Banca Popolare di Intra SpA Claris Finance 2008 S.r.l A (AA-), B (NR), C1 (NR), C2 (NR) Feb 11, 2011 Banca Apulia SpA Apulia Finance N. 4 S.r.l. (series ) Feb 11, 2011 Banca Apulia SpA Apulia Finance N. 4 S.r.l. (series ) A (AA-), B (NR) A (AA), B (NR) Feb 16, 2011 Banca Nazionale del Lavoro SpA Vela Mortgages S.r.l. (series 1) 5, A (AAA), B (AA), C (A), D (NR) Feb 16, 2011 Banca Nazionale del Lavoro SpA Vela Mortgages S.r.l. (series 2) 2, A (AAA), B (AAA), C (AA+), D (NR) Mar 21, 2011 Cassa di Risparmio di Parma e Piacenza SpA MondoMutui Cariparma S.r.l. 4, A (AAA), J (NR) Standard & Poors RatingsDirect on the Global Credit Portal February 17,

5 Table 2 Italian RMBS Transactions To Which We Assigned A Second Rating In 2011 (cont.) Feb 23, 2011 Banca Padovana Credito Cooperativo S.C. Alta Padovana Finance S.r.l. (series ) A (AAA), B (NR), C (NR) May 17, 2011 Banca Sella SpA Mars 2600 S.r.l. (series 2) A (AAA), B (AA), C (AA-), D (NR) May 31, 2011 Banca Sella SpA Mars 2600 (series 3) A (AAA), B (AA), C (A-), D (NR) Mar 11, 2011 Banca Popolare dell'alto Adige ScpA Voba Finance N. 2 S.r.l A (AA), B (NR), C (NR) Feb 11, 2011 Cassa di Risparmio di Bolzano SpA Fanes S.r.l. (series ) A (AAA), B (NR) Apr 22, 2011 NR--Not rated. Chart 1 Cassa di Risparmio di Ravenna and Banca di Imola Argentario Finance S.r.l A1 (AA), A2 (AA), B1 (NR), B2 (NR), C (NR) 5

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9 Chart 5 Table 3 Italian RMBS Transactions Included In Indices Issue date Originator Transaction Short name Mar 20, Banca Popolare di Vicenza Scarl Berica MBS S.r.l. Berica May 24, 2001 Sept 27, 2001 Feb 21, 2002 Mar 20, 2002 Jul 27, 2002 Mar 25, 2003 Dec 5, 2002 Dec 20, 2002 Jan 23, 2003 Banca Apulia SpA Apulia Finance S.r.l. Apulia Finance 1 Five Italian banks belonging to the co-operative credit ("credito cooperativo") system Credico Finance SpA Credico 1 Banca Popolare di Vicenza Scarl Berica 2 MBS S.r.l. Berica 2 Banche Popolari Unite Orio Finance No. 3 PLC Orio 3 Veneto Banca Scrl Claris Finance S.r.l. Claris Finance Fineco Banca ICQ SpA Heliconus S.r.l. Heliconus Banca CR Firenze SpA CR Firenze Mutui S.r.l. CR Firenze Banca Popolare di Intra Scparl Intra Mortgage Finance 1 S.r.l. Intra Barclays Bank PLC, Italian branch (formerly Banca Woolwich SpA) Mercurio Mortgage Finance S.r.l. (Series ) Mercurio 1 9

10 Table 3 Italian RMBS Transactions Included In Indices (cont.) Feb 17, 2003 Feb 27, 2003 Feb 28, 2003 Mar 13, 2003 Mar 14, 2003 Mar 28, 2003 Apr 28, 2003 Apr 30, 2003 June 26, 2003 Aug 6, 2003 Nov 28, 2003 Dec 3, 2003 Dec 22, 2003 Jan 26, 2004 Mar 12, 2004 Apr 16, 2004 Apr 16, 2004 Jun 22, 2004 Oct 21, 2004 Dec 4, 2004 Banca Popolare di Vicenza Scarl Berica 3 MBS S.r.l. Berica 3 Banca Intesa SpA IntesaBci Sec. 2 S.r.l. Intesa BCI 2 Banca Antoniana Popolare Veneta SpA Giotto Finance 2 SpA Giotto 2 Banche Popolari Unite and Centrobanca SpA Sintonia Finance S.r.l. Sintonia Banca Agricola Mantovana SpA Mantegna Finance II S.r.l. Mantegna Finance II Banca delle 'Mar.e SpA Mar.e Mutui Societa per la Cartolarizzazione Mar.e Mutui Unibanca SpA Romagna Finance S.r.l. Romagna Banca Nazionale del Lavoro SpA Vela Home S.r.l. Vela Home 1 Barclays Bank PLC, Italian branch (formerly Banca Woolwich SpA) Mercurio Mortgage Finance S.r.l. (Series ) Mercurio 2 Banca Apulia SpA Apulia Finance No. 2 S.r.l. Apulia Finance 2 Fin-Eco Banca ICQ SpA F-E Mortgages S.r.l. F-E Mortgages Banca Meridiana SpA and Veneto Banca Scrl Claris Finance 2003 S.r.l. Claris Finance 2003 Meliorbanca SpA Sestante Finance S.r.l. Sestante Finance Banca Monte dei Paschi di Siena SpA Siena Mortgages 03-4 S.r.l. Siena 03-4 Banca Popolare di Vicenza Scarl and Cariprato - Cassa di Risparmio di Prato SpA Berica Residential MBS 1 S.r.l. Berica 4 Banca Poplare di Spoleto SpA Spoleto Mortgages S.r.l. Spoleto Banca Nazionale del Lavoro SpA Vela Home S.r.l. Vela 2 12 Italian banks belonging to the co-operative credit ("credito cooperativo") system Credico Finance 3 S.r.l. Credico 3 Banca Apulia SpA Apulia Mortgages Finance N. 3 S.r.l. Apulia 3 Meliorbanca SpA Sestante Finance S.r.l. Sestante 2 Feb 3, 2005 Banca Popolare di Puglia e Basilcata S.c.a.r.l. Media Finance S.r.l Media Apr 8, 2005 FinecoBank SpA F-E Mortgages S.r.l. series 2005 F-E Mortgages 2005 May 6, 2005 Jul 12, 2005 Jan 21, 2005 Nov 3, 2005 Dec 16, 2005 Unicredit Banca SpA Cordusio RMBS S.r.l. Cordusio 1 Banca di Bergamo SpA and Veneto Banca SCPA Claris Finance 2005 S.r.l. Claris 2005 Banca Popolare di Vicenza Scarl, Cariprato - Cassa di Risparmio di Prato SpA, and Banca Nuova SpA Berica 5 Residential MBS S.r.l. Berica 5 Banca Nazionale del Lavoro Vela Home S.r.l. Series 3 Vela 3 Meliorbanca SpA Sestante Finance S.r.l. Series 3 Sestante 3 Standard & Poors RatingsDirect on the Global Credit Portal February 17,

11 Table 3 Italian RMBS Transactions Included In Indices (cont.) Dec 21, 2005 Feb 16, 2006 Feb 21, 2006 Jul 12, 2006 Cassa di Risparmio di Asti SpA Asti Finance S.r.l. Asti Banca Nazionale del Lavoro SpA Vela ABS S.r.l. Vela ABS Banca Nuova SpA, Cariprato - Cassa di Risparmio di Prato SpA, Banca Popolare di Vicenza ScpA Berica 6 Residential MBS S.r.l. Berica 6 Unicredit Banca SpA Cordusio RMBS 2 S.r.l. Cordusio 2 Jul 4, 2006 Banca Popolare di Milano BPM Securitisation 2 S.r.l. BPM 2 Oct 2, 2006 Banca Nazionale del Lavoro Vela Home S.r.l. Series 4 Vela 4 Oct 27, 2006 Nov 23, 2006 Dec 19, 2006 Mar 5, 2007 Feb 15, 2007 Mar 15, 2007 Mar 15, 2007 May 5, 2007 Jul 15, 2007 Jul 15, 2007 Dec 14, 2007 Dec 17, 2007 Dec 19, 2007 May 21, 2008 May 23, 2008 Jun 06, 2008 Jun 16, 2008 Jun 30, 2008 Jul 02, 2008 Aug 4, 2008 Jul 30, 2009 Banca delle 'Mar.e SpA Mar.e Mutui 2 Societa per la Cartolarizzazione a.r.l. Mar.e 2 Unicredit Banca per la Casa SpA Cordusio RMBS 3 - UBCasa 1 S.r.l. Cordusio 3 UBC-1 Meliorbanca SpA Sestante Finance S.r.l. Series 4 Sestante 4 Intesa Sanpaolo SpA Intesa Sec. 3 S.r.l. Intesa Sec 3 Banca Meridiana SpA, Banca di Bergamo SpA, and Veneto Banca Holdings S.C.P.A. Claris Finance 2007 S.r.l. Claris 2007 Banco Popolare Societa Cooperativa SCRL BP Mortgages S.r.l. BP Mortgages Banca di Roma SpA Capital Mortgage S.r.l. Capital Mortgage UniCredit Banca SpA Cordusio RMBS Securitisation S.r.l. Cordusio 4 Credito Bergamasco and Banco Popolare Societa Cooperativa SCRL BP Mortgages S.r.l. series 2 BP Mortgages BHW Bausparkasse AG, Hameln PB Domicilio Ltd. PB Domicilio Deutsche Bank Mutui SpA Eurohome (Italy) Mortgages S.r.l. Eurohome (Italy) Mortgages S.r.l. Banca Popolare di Crema SpA Banca Popolare di Cremona SpA, Banca Popolare di Lodi SpA, and Cassa di Risparmio di Lucca Pisa e Livorno SpA BPL Mortgages S.r.l. BPL Mortgages Bipop Carire SpA Capital Mortgage S.r.l. BIPCA Cordusio RMBS Unipol Banca SpA Grecale ABS S.r.l. Grecale ABS Cassa di Risparmio di Asti SpA Asti Finance S.r.l. Asti 2008 Cassa di Risparmio della Provincia di Teramo SpA Adriatico Finance RMBS S.r.l. Adriatico Finance Meliorbanca SpA Sestante Finance S.r.l. Series 5 Sestante 5 Barclays Bank PLC Mercurio Mortgage Finance S.r.l. Mercurio Banca Popolare di Puglia e Basilicata Scpa Media Finance S.r.l Media 2 Intesa Sanpaolo SpA Adriano Finance S.r.l. Adriano Finance Banca Popolare di Bari S.c.p.a. Popolari Bari Mortgages S.r.l. Popolare Bari 11

12 Table 3 Italian RMBS Transactions Included In Indices (cont.) Nov 18, 2008 Nov 17, 2008 Aug 7, 2009 Cassa di Risparmio di Cento SpA Guercino Solutions S.r.l. Guercino Solutions Banca Popolare di Vicenza ScpA, Cariprato - Cassa di Risparmio di Prato SpA, and Banca Nuova SpA Berica 7 Residential MBS S.r.l. Berica 7 Banca popolare dell'emilia Romagna S.C. Estense Finance S.r.l. Estense *The indices also include data from the following fully repaid transactions: Upgrade SpA, BPM Securitisation S.r.l., Bononia Funding S.r.l., Palazzo Finance 2 SpA., Grecale S.r.l., Siena Mortgages 00-1 SpA, Siena Mortgages 01-2 SpA, BPV Mortgages S.r.l., Garda Securitisation S.r.l., Velites S.r.l., Orio Finance No. 1 PLC and Orio Finance No. 2 PLC.,Mosaico Finance S.r.l.,Seashell II S.r.l., Siena Mortgages 02-3 SpA, BPL Mortgages S.r.l. Table 4 Italian RMBS Transactions Closed In 2011* Issue date Originator Issuer Size (mil. ) Apr 12, Banca Popolare di Puglia e Basilicata ScpA (BPPB) Media Finance S.r.l. (series ) Jun 21, 2011 Jul 22, 2011 Jul 25, 2011 Nov 23, 2011 Ratings on all classes at issuance A1 (AAA), A2 (AAA), B (NR) Cassa di Risparmio di Ferrara SpA Giovecca Mortgages S.r.l A1 (AAA), J (NR) Banca Santo Stefano Credito Cooperativo Martellago Venezia Società Cooperativa Cassa di Risparmio di Bra (CR Bra), Banca di Credito Cooperativo di Pianfei e Rocca de'baldi (Bcc Pianfei), and Banca Alpi Marittime (Alpi Marittime) BSS Securitisation 1 S.r.l A1 (AAA), A2 (AAA), B (BBB), C (NR) Dedalo Finance S.r.l A (AAA), B (NR) Banca Popolare dell'alto Adige S.C.p.A. VOBA N. 3 S.r.l A1 (AAA), A2 (AAA), J (NR) Dec 2, 2011 Cassa di Risparmio di Bolzano SpA Fanes S.r.l. (Series ) A (AAA), B (NR) *Rated by Standard & Poor's. NR--Not rated. Standard & Poors RatingsDirect on the Global Credit Portal February 17,

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32 Chart 26 Related Criteria And Research Economic Research: Assessing The Severity Of The Eurozone Recession Is A Close Call, Jan. 31, 2012 Various Rating Actions Taken On 340 European Structured Finance Tranches After Eurozone Sovereign Rating Actions, Jan. 23, 2012 Italy's Unsolicited Ratings Lowered To 'BBB+/A-2'; Outlook Negative, Jan. 13, 2012 Ratings On 305 Tranches In 120 European RMBS Transactions Placed On CreditWatch Negative After Bank Rating Actions, Dec. 21, 2011 Economic Research: The Specter Of A Double Dip In Europe Looms Larger, Oct. 4, 2011 Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions, June 14, 2011, Counterparty And Supporting Obligations Update, Jan. 13, 2011 Counterparty and Supporting Obligations Methodology and Assumptions, Dec. 6, 2010 Update To The Cash Flow Criteria For European RMBS Transactions, Jan. 6, 2009 Update To The Criteria For Rating Italian Residential Mortgage-Backed Securities, Jan. 6, 2009 Revised Italian RMBS High Constant Payment Rate Assumption, Oct. 14, 2008 Keeping Up With The Diversity: Navigating The Multifarious Italian RMBS Market, May 11, 2006 Additional Contact: Structured Finance Europe; StructuredFinanceEurope@standardandpoors.com Standard & Poors RatingsDirect on the Global Credit Portal February 17,

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