(Repeat for additional subscribers)
March 31 (The following statement was released by the rating agency)
Fitch Ratings has assigned Penarth Master Issuer plc's
series 2014-1 notes, backed by UK credit card receivables originated by the Bank
of Scotland plc (BoS; A/Stable/F1) and Lloyds Bank plc (Lloyds;
A/Stable/F1), expected ratings as follows:
Series 2014-1 A1: 'AAA(EXP)sf'; Outlook Stable
Series 2014-1 A2: 'AAA(EXP)sf'; Outlook Stable
The final ratings on the new notes are contingent on the receipt of final
documentation conforming to information already reviewed, including the issue
Fitch has also reviewed and affirmed the ratings of the six outstanding
Fitch-rated tranches of the Penarth master trust programme, as follows:
GBP300m Series 2010-2 A3 affirmed at 'AAAsf'; Outlook Stable
GBP125m Series 2011-1 A2 affirmed at 'AAAsf'; Outlook Stable
USD750m Series 2013-1 A1 affirmed at 'AAAsf'; Outlook Stable
GBP1,300m Series 2013-1 A2: affirmed at 'AAAsf'; Outlook Stable
GBP200m Series 2010 B1 affirmed at 'AAsf'; Outlook Stable
GBP330m Series 2010-2 B1 affirmed at 'AAsf'; Outlook Stable
KEY RATING DRIVERS
Firm Asset Performance
Fitch's base case charge-off expectation remains unchanged at 7.5% for the
Penarth trust, which is at the midpoint of the range of 4.5% to 10% assigned in
similar transactions. The agency's base case assumptions for the trust's monthly
payment rate (18%) and yield rate (16%) also remain unchanged since the most
recent performance review in November 2013.
Due to the revolving nature of the underlying assets, relative to the amortising
receivables, asset performance is closely linked to the performance of the
originator. Fitch conducted an annual review of the underwriting and servicing
processes at BoS and Lloyds in December 2013 and found both the policies and
procedures satisfactory, as were implementation and controls.
Interchange Cap Impact
Fitch has expected regulatory pressure on interchange fees for some time and
therefore the agency has not given full credit to interchange revenue when
setting its base case yield assumption, as denoted in the Credit Card ABS Rating
Criteria and in previous reports. Further EU regulation is expected to reduce
the cap on interchange fees to 0.3% (the current UK level is 0.9%) of transacted
amounts and is due to come into force from 3Q15 in the UK. No additional yield
stress was applied in the analysis, as the impact of the cap will also depend on
any second-order effects on cardholder composition, payment behaviour and any
countermeasures originators might implement. Fitch will continue to assess any
downward pressure on yield as a result of regulatory and competitive forces.
Stable Asset Outlook
The performance for credit card trusts continued to improve throughout 4Q13,
with charge-off, delinquency and payment rates improving, while yield rates were
stable over the same period.
Fitch revised up its GDP forecast to 2.5% for 2014 and 2015 from 2.3% for both
years in the December Global Economic Outlook. The agency believes annual UK
unemployment rates for 2014 and 2015 will continue to drop from their current
level of 7.2% (December 2013), to 6.9% and 6.5%, respectively. Fitch therefore
maintains its stable outlook for UK credit card trusts throughout 2014.
Rating sensitivity to increased charge-off rate
Current rating (base case: 7.5%): 'AAAsf'
Increase base case by 25%: 'AA+sf'
Increase base case by 50%: 'AAsf'
Increase base case by 75%: 'AA-sf'
Rating sensitivity to reduced MPR
Current rating (base case: 18%): 'AAAsf'
Reduce base case by 10%: 'AA+sf'
Reduce base case by 25%: 'AA+sf'
Reduce base case by 50%: 'Asf'
Rating sensitivity to reduced purchase rate (ie aggregate new purchases divided
by aggregate principal repayments in a given month)
Current rating (base case: 100%): 'AAAsf'
Reduce base case by 50%: 'AA+sf'
Reduce base case by 75%: 'AA+sf'
Reduce base case by 100%: 'A+sf'
Rating sensitivity to increased charge-off rate and reduced MPR
Current rating: 'AAAsf'
Increase charge-off rate by 25% and reduce MPR by 15%: 'AA+sf'
Increase charge-off rate by 50% and reduce MPR by 25%: 'A+sf'
Increase charge-off rate by 75% and reduce MPR by 50%: 'BBBsf'
Link to Fitch Ratings' Report: Penarth Master Issuer plc: 2014-1 A1 and A2