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Fitch Affirms Swiss Home Loan Securities 2016-1 SARL at 'AAAsf'/Stable.

Paris: Fitch Ratings has affirmed Swiss Home Loan Securities 2016-1 SARL's notes ratings as follows:

Class A1: 'AAAsf'; Outlook Stable

Class A2:'AAAsf'; Outlook Stable

Class B: not rated

Swiss Home Loan Securities 2016-1 SARL is a static securitisation of a Swiss residential mortgage loans portfolio. The securitised loans are interest-only or amortising loans bearing either a fixed or floating interest rate. The related properties, primarily flats and houses, are all located in Switzerland, primarily in the western parts.


Performance within Expectations

The transaction is performing in accordance to Fitch's expectations set during the initial rating analysis. The level of loans in arrears for more than one month has remained stable over the past year at a low 0.8%. The cumulative defaults of 0.13% are in line with the default base case defined for the transaction at closing.

Concentrations as Key Risk

The small size of the portfolio translates into a higher borrower concentration than usual in EMEA RMBS transactions. The obligor concentration has remained broadly stable with the top 10 borrowers representing 10.5% of the outstanding portfolio. The underlying properties are geographically concentrated in western Switzerland (75% in the cantons of Vaud and Geneva), reflecting the bank's main area of business. Concentration tests were performed and the agency found that the credit support available in the transaction was commensurate with the loan concentration risk. In its initial analysis, Fitch also accounted for concentration risks in stressed scenarios by increasing its default expectation.

High Interest Rate Risk

Due to the absence of an interest rate swap and the reliance on an approximate natural hedge, unhedged interest rate risk in our stress scenarios resulted in considerable losses due to negative carry. The portfolio's interest rate composition has remained stable since closing, which was taken into consideration under the multiple interest rate switch scenarios tested during the initial analysis.

Model Application

Consistent with the model application language specified in the EMEA RMBS Rating Criteria, Fitch did not update its surveillance, ResiEMEA or cash flow models for this review.


In the initial asset analysis, dated 12 December 2016, Fitch applied a variation from its Criteria Addendum: Switzerland - Residential Mortgage Assumptions on the treatment of loans in arrears. Loans in arrears up to 30 days past due and paying by money transfer were not considered as delinquent in Fitch analysis. According to the originator, such delinquencies are usually corrected within a few days and are related to the collection process (money transfer payments, which are widely used in the pool and in Switzerland in general).


Deterioration in asset performance may result from economic factors, in particular an increase of unemployment. As a result, the increase in new defaults and associated pressure on excess spread levels could result in negative rating action.

Increased obligor concentration as the portfolio amortises may also negatively impact the rating of the transaction if the concentration risk becomes significant relative to the then available credit enhancement.


Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.


Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that affected the rating analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information nor conducted a review of origination files as part of its ongoing monitoring.

Prior to the transaction closing, Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of Credit Agricole Next Bank's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall and together with the assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.


The information below was used in the analysis.

-Loan-by-loan data provided by Credit Agricole Next Bank as at 31 October 2017

-Transaction reporting provided by TMF Investments S.A. as at 25 October 2017
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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Feb 5, 2018
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