BANCO SANTANDER, S.A.
Fitch Ratings expects to assign ratings and Rating Outlooks to
The risk of potential increases in delinquencies and coronavirus pandemic-related losses has lessened due to extensive government stimulus efforts, payment relief programs, the speed of vaccine rollouts, a robust wholesale market and a faster pace of economic recovery. As such, Fitch has retired its coronavirus baseline and downside scenarios. However, Fitch's base case cumulative net loss (CNL) proxy is derived by considering 2006-2009
RATING ACTIONSENTITY/DEBT RATING
A-1
ST F1+(EXP)sf Expected Rating
A-2
LTAAA (EXP)sf Expected Rating
A-3
LTAAA (EXP)sf Expected Rating
B
LT AA(EXP)sf Expected Rating
C
LT A(EXP)sf Expected Rating
D
LT BBB(EXP)sf Expected Rating
E
LT NR(EXP)sf Expected Rating
VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Collateral Performance-Stable Credit Quality: 2021-4 is backed by collateral that is generally consistent with prior recent pools, with a weighted average (WA)
Payment Structure-Sufficient Credit Enhancement: Initial hard credit enhancement (CE) totals 50.60%, 36.85%, 25.25%, 13.75% and 7.50% for classes A, B, C, D and E, respectively, down from 2021-3 for classes A, B, and C and up for class D. Excess spread is expected to be 9.97% per annum. Loss coverage for each class of notes is sufficient to cover respective multiples of Fitch's base case cumulative net loss proxy of 17.00%, consistent with 17.00% in 2021-3.
Forward-Looking Approach to Derive Base Case Proxy - Low Losses and Delinquencies: Fitch considered economic conditions and future expectations by assessing key macroeconomic and wholesale market conditions when deriving the series loss proxy. Consistent with recent transactions, an additional stress was applied to 75-month loans in deriving the loss proxy, as performance for these contracts has generally been volatile.
Although within range of 2010-2012 performance, SC's 2013-2017 losses tracked higher yet ABS performance remains within Fitch's initial expectations, consistently exhibiting stronger performance than that of the managed portfolio. Therefore, Fitch's initial base case CNL proxy was derived utilizing 2006-2009 and 2014-2017 vintage ranges, including recessionary static managed portfolio data and more recent ABS performance. Fitch arrived at a forward-looking credit loss expectation of 17.00%.
Seller/Servicer Operational Review-Consistent Origination/Underwriting/Servicing: SC demonstrates adequate abilities as the originator, underwriter and servicer, as evidenced by historical portfolio and securitization performance. Fitch rates SC's ultimate parent,
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Unanticipated increases in the frequency of defaults could produce CNL levels higher than the base case and would likely result in declines of CE and remaining net loss coverage levels available to the notes. Additionally, unanticipated declines in recoveries could also result in lower net loss coverage, which may make certain note ratings susceptible to potential negative rating actions depending on the extent of the decline in coverage.
Therefore, Fitch conducts sensitivity analyses by stressing both a transaction's initial base case CNL and recovery rate assumptions, as well as examining the rating implications on all classes of issued notes. The CNL sensitivity stresses the CNL proxy to the level necessary to reduce each rating by one full category, to non-investment grade (BBsf) and to 'CCCsf', based on the break-even loss coverage provided by the CE structure.
Additionally, Fitch conducts 1.5x and 2.0x increases to the CNL proxy, representing both moderate and severe stresses. Fitch also evaluates the impact of stressed recovery rates on an auto loan ABS structure and rating impact with a 50% haircut. These analyses are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Stable-to-improved asset performance driven by stable delinquencies and defaults would lead to increasing CE levels and consideration for potential upgrades. If CNL is 20% less than the projected proxy, the expected ratings for the subordinate notes could be upgraded by up to one category.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
The concentration of electric and hybrid vehicles of approximately 0.3% of the pool did not have an impact on Fitch's ratings analysis or conclusion of this transaction and has no impact on Fitch's ESG Relevance Score.
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
APPLICABLE CRITERIA
Global Structured Finance Rating Criteria (pub.
Exposure Draft: Structured Finance and Covered Bonds Counterparty Rating Criteria (pub.
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