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May 19 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed FBS SpA’s (FBS) Italian Residential and Commercial Mortgage Special Servicer Ratings at ‘RSS2’ and ‘CSS2’, respectively. The agency has also assigned an Italian Asset Backed Securities (ABS) Special Servicer Rating of ‘ABSS2’.
The ratings reflect FBS’s continued ability to manage the workout process for defaulted loans. The ABS rating reflects that, following portfolio growth in recent years, over 78% of assets under management (AUM) are now unsecured (by value).
Over the past 12 months the company has increased its AUM by 52% (by value). The portfolio is growing for the third consecutive year. This is reflective of the current opportunities for NPL servicers in Italy with an increasing amount of portfolios changing ownership that require third-party servicing. It also demonstrates the continuous commitment of the company’s senior management to develop the business and establish strong relationships.
The ratings further reflect FBS’s enhancements to its training programme, including new training techniques and increased emphasis on team building and staff motivation. In Fitch’s view this is particularly important in light of the recent intake of staff/growth of the operation and the emphasis on staff development has resulted in lower staff turnover than peers and an increase of internal promotions over the last 12 months.
FBS does not benefit from the support of a rated parent. In line with the growing portfolio size revenues increased in 2013 and the company made a net profit for the second consecutive year. Furthermore, the company managed to reduce servicing costs by more than 50% compared with the previous year.
The affirmation also highlights the company’s strong risk management regime, which comprises features such as ICAAP reporting, mid-term strategic business planning and regular internal audits covering the end-to-end of the operation. The framework is supported by experienced individuals each with longer company tenure than most of FBS’s peers.
The external network of door-to-door collectors and the internal phone collection team have been in place for almost 18 months. The network offers a wide range of borrower contact and the ability to service smaller-size, mainly unsecured loans. It has now been further embedded into the organisation and monitoring has been further enhanced; however, in terms of dealing with unsecured consumer loans/small ticket loans FBS’s experience lags behind peers.
As of end-April 2014 FBS’s servicing portfolio totalled EUR5.44bn in gross book value (GBV) with 308,205 loans, up from EUR3.59bn in April 2013. The portfolio comprised 15 securitised transactions, representing EUR4.25bn or 78% of the total portfolio. According to FBS’s definition GBV is the acquisition price of the loan amount until resolution.
Fitch employed its global servicer rating criteria in analysing the servicer’s operations and financial condition, with the former criteria including a comparison of similar Italian servicers as part of the review process.