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Rating Action: Moody's assigns definitive ratings to BBVA Consumo 11, FT ABSGlobal Credit Research - 16 Mar 2021EUR 2,500 million ABS Notes rated, relating to a portfolio of Spanish Consumer LoansMadrid, March 16, 2021 -- Moody's Investors Service ("Moody's") has assigned the following definitive ratings to the notes issued by BBVA Consumo 11, FT ("the issuer"):....EUR 2,350 million Series A Fixed Rate Asset Backed Notes due Dec 2033, Assigned definitive rating Aa1 (sf)....EUR 150 million Series B Fixed Rate Asset Backed Notes due Dec 2033, Assigned definitive rating B1 (sf)RATINGS RATIONALEThe transaction is a static cash securitisation of Spanish unsecured consumer loans originated by Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) (A3/ A3(cr), A2 Bank Deposits). The portfolio consists of consumer loans used for several purposes, such car acquisition, property improvement and other undefined or general purposes. BBVA also acts as servicer, collection account bank and issuer account bank provider of the transaction.The underlying assets consist of consumer loans with mostly fixed rates (98.8% of the pool) and a total outstanding balance of approximately E 2,618 million. As of 23rd of February 2021, the provisional portfolio has 306,682 loans with a weighted average interest of 6.8%. The portfolio is highly granular with the largest and 20 largest borrower representing 0.004% and 0.062% of the pool, respectively. The portfolio also benefits from a good geographic diversification and good weighted average seasoning of 17.5 months. No loans in grace period due to moratoriums will be securitised at closing. The final portfolio will be selected at random from the provisional portfolio to match the final note issuance amount.The transaction benefits from credit strengths such as a strong artificial write-off, which traps the available excess spread to cover any losses when the loan has been six months in arrears. Interest and principal on Class B are fully subordinated to Class A and the amortization of the notes is fully sequential. No interest rate risk as both interest on the asset and the notes are fixed.However, Moody's notes that there is a risk of yield compression as 96.7% of the loans in the pool has the option of an automatic discount on the loan interest rate as a result of the future cross selling of other products. Various mitigants have been put in place in the transaction structure, such as performance-related triggers to stop the amortisation of the reserve fund. Commingling risk is mitigated by the transfer of collections to the issuer account bank within two days and the high rating of BBVA. If BBVA's long term deposit rating is downgraded below Baa1, it will either transfer the issuer account to an eligible entity or guarantee the obligations of BBVA.The coronavirus pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of consumer assets from a gradual and unbalanced recovery in Spanish economic activity.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.Moody's analysis focused, amongst other factors, on (i) an evaluation of the underlying portfolio of consumer loans and the eligibility criteria; (ii) historical performance provided on BBVA's total book and past consumer loan ABS transactions and performance of previous BBVA Consumo deals; (iii) the credit enhancement provided by subordination, excess spread and the reserve fund; (iv) the liquidity support available in the transaction by way of principal to pay interest; and (v) the overall legal and structural integrity of the transaction.MAIN MODEL ASSUMPTIONSMoody's determined a portfolio lifetime expected mean default rate of 4.5%, expected recoveries of 15.0% and a portfolio credit enhancement ("PCE") of 17.0%. The expected defaults and recoveries capture our expectations of performance considering the current economic outlook, while the PCE captures the loss we expect the portfolio to suffer in the event of a severe recession scenario. Expected defaults and PCE are parameters used by Moody's to calibrate its lognormal portfolio loss distribution curve and to associate a probability with each potential future loss scenario in its ABSROM cash flow model to rate consumer ABS transactions.The portfolio expected mean default rate of 4.5% is in line with recent Spanish consumer loan transaction average and is based on Moody's assessment of the lifetime expectation for the pool taking into account (i) historic performance of the loan book of the originator, (ii) good performance track record on most recent BBVA consumo deals with cumulative 3m+ arrears below 3.95%, (iii) benchmark transactions, and (iv) other qualitative considerations.Portfolio expected recoveries of 15% is in line with recent Spanish consumer loan average and are based on Moody's assessment of the lifetime expectation for the pool taking into account (i) historic performance of the loan book of the originator, (ii) benchmark transactions, and (iii) other qualitative considerations such as quality of data provided.The PCE of 17.0% is in line with other Spanish consumer loan peers and is based on Moody's assessment of the pool taking into account the relative ranking to originator peers in the Spanish auto loan market. The PCE of 17.0% results in an implied coefficient of variation ("CoV") of 51%.The principal methodology used in these ratings was "Moody's Approach to Rating Consumer Loan-Backed ABS" published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1230138. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:Factors or circumstances that could lead to an upgrade of the ratings of the Notes would be (1) better than expected performance of the underlying collateral; or (2) a lowering of Spain's sovereign risk leading to the removal of the local currency ceiling cap.Factors or circumstances that could lead to a downgrade of the ratings would be (1) worse than expected performance of the underlying collateral; (2) deterioration in the credit quality of BBVA; or (3) an increase in Spain's sovereign risk.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Alberto Barbachano VP - Senior Credit Officer Structured Finance Group Moody's Investors Service Espana, S.A. Calle Principe de Vergara, 131, 6 Planta Madrid 28002 Spain JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Barbara Rismondo Senior Vice President/Manager Structured Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Espana, S.A. 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