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TEXT-Fitch affirms 23 tranches of Bancaja series; cuts 2

(The following statement was released by the rating agency)

Oct 05 - Fitch Ratings has affirmed 23 and downgraded two tranches of Bancaja 3-9, a series of Spanish RMBS. The agency has also removed 19 tranches from Rating Watch Negative (RWN). A full list of rating actions is at the end of this commentary.

The downgrades of the junior notes in Bancaja 4 and 7 are mainly due to the weaker performance of the assets in the past 12 months and the insufficient levels of credit support available. The removal of the RWN on notes rated above 'BBBsf' follows the implementation of remedial actions on ineligible counterparties. The role of account bank and paying agent has been transferred to Barclays Bank Plc ('A'/Stable/'F1') from Banco Santander ('BBB+'/Negative/'F2') in all deals, in line with the transaction documentation. In Fitch's view, Barclays Bank Plc is deemed an eligible counterparty to support ratings of structured finance transactions of 'AA-sf'.

The Bancaja series features residential mortgage loans originated and serviced by Caja de Ahorros de Valencia, Castellon, y Alicante now integrated within Bankia ('BBB'/Negative/'F2') with a very strong regional concentration in the Valencia region.

In Fitch's view, the worsening macroeconomic environment is having an impact on borrower affordability across the transactions. As of August 2012, the portion of loans in arrears by more than three months (3M+ arrears) rose to between 3.8% and 1.2% relative to the current portfolio balances compared with 2.6% and 0.6% 12 months ago. The Negative Outlooks on the majority of the junior and mezzanine notes reflects Fitch's concern about the arrears trend and the general outlook for the Spanish mortgage market.

Bancaja 4 experienced one of the steepest rises in arrear levels, with the 3M+ ratio as of August 2012 rising to 1.5% compared to 0.6% 12 months ago. As a result, the pro rata amortisation triggers (set at 2% of all loans arrears by more than three months including defaults of the current portfolio), have now been breached and the notes are paying down sequentially. The downgrade of the Class C notes is a direct reflection of the weaker asset performance.

The Bancaja 7 transaction also experienced a rise in arrears, albeit not as great as that observed in Bancaja 4, with the 3M+ arrears rising to 1.7% compared to 0.9% 12 months ago. The levels of credit enhancement available to the Class D notes was deemed insufficient to withstand e 'BBBsf' stresses following Fitch's updated assumptions captured in the latest Spanish RMBS criteria (see 'EMEA Residential Mortgage Loss Criteria Addendum - Spain' dated 24 July 2012). As a result, the class D note has been downgraded to 'BBsf'.

The rating actions are as follows: Bancaja 3, Fondo de Titualizacion de Activos: Class A (ISIN ES0312882006): affirmed at 'AA-sf'; Outlook Negative; off RWN Class B (ISIN ES0312882014): affirmed at 'AA-sf'; Outlook Negative; off RWN Class C (ISIN ES0312882022): affirmed at 'BBBsf'; Outlook Stable Bancaja 4, Fondo de Titualizacion Hipotecaria: Class A (ISIN ES0312883004): affirmed at 'AA-sf'; Outlook Negative Class B (ISIN ES0312883012): affirmed at 'AA-sf'; Outlook Negative Class C (ISIN ES0312883020): downgraded to 'BBB+sf' from 'A+sf'; Outlook Negative Bancaja 5, Fondo de Titualizacion de Activos: Class A (ISIN ES0312884002): affirmed at 'AA-sf'; Outlook Negative; Off RWN Class B (ISIN ES0312884010): affirmed at 'AA-sf'; Outlook Negative; Off RWN Class C (ISIN ES0312884028): affirmed at 'A-sf'; Outlook revised to Negative from Stable Bancaja 6, Fondo de Titualizacion de Activos: Class A2 (ISIN ESO312885017); affirmed at 'AA-sf'; Outlook Negative; Off RWN Class B (ISIN ESO312885025): affirmed at 'AA-sf'; Outlook Negative; Off RWN

Class C (ISIN ESO312885033): affirmed at 'A-sf'; Outlook revised to Negative from Stable

Bancaja 7, Fondo de Titualizacion de Activos: Class A2 (ISINES0312886015): affirmed at 'AA-sf'; Outlook Negative; Off RWN Class B (ISIN ES0312886023): affirmed at 'AA-sf'; Outlook Negative; Off RWN Class C (ISINES0312886031): affirmed at 'A-sf'; Outlook Negative; Off RWN Class D (ISINES0312886049): downgraded to 'BBsf' from 'BBB-sf'; Outlook Negative Bancaja 8, Fondo de Titulizacion de Activos: Class A (ISIN ES0312887005): affirmed at 'AA-sf'; Outlook Negative; Off RWN Class B (ISIN ES0312887013): affirmed at 'A+sf'; Outlook Negative; Off RWN Class C (ISIN ES0312887021): affirmed at 'BBB+sf'; Outlook Negative Class D (ISIN ES0312887039): affirmed at 'BB+sf'; Outlook Negative Bancaja 9, Fondo de Titulizacion de Activos : Class A2 (ISIN ES0312888011): affirmed at 'AA-sf'; Outlook Negative; Off RWN Class B (ISIN ES0312888029): affirmed at 'Asf'; Outlook Negative; Off RWN Class C (ISIN ES0312888037): affirmed at 'BBsf'; Outlook Negative Class D (ISIN ES0312888045): affirmed at 'Bsf'; Outlook Negative Class E (ISIN ES0312888052): affirmed at 'CCsf'; Recovery Estimate of 0%

((Bangalore Ratings Team, Hotline: +91 80 4135 5898 Debanjali.Ghosh@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Debanjali.Ghosh.reuters.com@reuters.net))