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Fitch Upgrades Postal Savings Bank's Jiamei 2016-1 RMBS B Notes
July 5, 2017 / 6:25 AM / 5 months ago

Fitch Upgrades Postal Savings Bank's Jiamei 2016-1 RMBS B Notes

(The following statement was released by the rating agency) HONG KONG, July 05 (Fitch) Fitch Ratings has upgraded the class B notes of Jiamei 2016-1 Residential Mortgage-Backed Securities and affirmed the class A1, A2 and A3 notes. The notes are backed by residential mortgages in China originated by Postal Savings Bank of China Co Ltd. (PSB). The rating actions are as follows: CNY151.0 million Class A1 notes due September 2046 affirmed at 'A+sf'; Outlook Stable CNY900.0 million Class A2 notes due September 2046 affirmed at 'A+sf'; Outlook Stable CNY1,364.4 million Class A3 notes due September 2046 affirmed at 'A+sf'; Outlook Stable CNY156.0 million Class B notes due September 2046 upgraded to 'Asf' from 'BBBsf'; Outlook Stable KEY RATING DRIVERS The upgrade of the class B notes was based on higher credit enhancement (CE) of 12.1% as at March 2017, up from 9.2% at closing, strong asset performance, and stable sector outlook. Reported CE for the class A notes also increased to 17.4%, from 13.3% at closing. The class A1 and A2 notes are paid on a predetermined schedule, which stipulates the target balance of each note after each monthly payment date. Both class A1 and A2 notes have been paid according to the schedule to date. The outstanding balance of the class A3 notes has substantially decreased to CNY1,364 million, from CNY1,908 million at closing, due to extra collection build-up between the pool cut-off date of 23 October 2015 and first payment date of 26 August 2016. The cumulative gross default rate stood at 0.06% as at end-March 2017; well within our base-case assumption of 0.20% cumulative defaults by March 2017 (month 18) based on our base-case default timing curve. The performance compares favourably to China's two most seasoned RMBS transactions - China Construction Bank 2005-1 and 2007-1, where the cumulative gross default rates stood at 0.17% and 0.48%, respectively, at month 18. Fitch forecasts China's GDP growth at 6.4% in 2017 and 5.7% in 2018, and we see the asset and sector outlook of Jiamei 2016-1 as stable. An 'A+' cap on Jiamei 2016-1 reflects the shortcomings of the data set available to Fitch for analysis. Data is only available during positive economic periods and is not at a granular level, as such, Fitch is unable to derive the factors that cause defaults. RATING SENSITIVITIES Unanticipated increases in the frequency of defaults and/or the loss severity on defaulted loans could produce loss levels higher than Fitch's base case and are likely to result in a decline in CE and remaining loss-coverage levels available to the notes. Decreased CE may make certain note ratings susceptible to negative rating action, depending on the extent of the decline in coverage. Hence, Fitch has evaluated the sensitivity of the ratings assigned to Jiamei 2016-1 by stressing the transaction's initial base-case assumptions. The analysis found the class A and B notes' ratings remained stable under Fitch's standard sensitivity scenarios of a 15% increase in defaults or 30% decrease in recoveries. In the combined scenarios, ratings remained stable for the class A and B notes under both the 15% increase in defaults and 15% decrease in recoveries. For both 30% increase in defaults and 30% decrease in recoveries, ratings remained stable for the class A1, A2 and A3 notes, but the class B notes would be downgraded to 'A-sf'. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10 {Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio or reviewed the origination files as part of its ongoing monitoring. Prior to the transactions closing, Fitch reviewed a small targeted sample of PSB's origination files and found the information contained in the 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, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis: Pool cut-off data on a loan-by-loan level as at March 2017 All servicer and trustee reports provided by PSB as at March 2017 The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Contacts: Lead Surveillance Analyst Grace Li Director +852 2263 9936 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Committee Chairperson Ben McCarthy Managing Director +612 8256 0388 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on Applicable Criteria APAC Residential Mortgage Rating Criteria (pub. 27 Apr 2017) here Criteria for Country Risk in Global Structured Finance and Covered Bonds (pub. 26 Sep 2016) here Fitch's Interest Rate Stress Assumptions for Structured Finance and Covered Bonds - Excel File (pub. 17 Feb 2017) here Global Structured Finance Rating Criteria (pub. 03 May 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 23 May 2017) here Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 17 Feb 2017) here Related Research Jiamei 2016-1 Residential Mortgage-Backed Securities - Appendix here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. 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