The rating actions are as follows:

Class A (ISIN: ES0305078000), EUR 2,118.5m: affirmation at AA-_SF
Class B (ISIN: ES0305078018), EUR 590m: affirmation at CC_SF
Class C (ISIN: ES0305078026), EUR 147.5m: affirmation at C_SF

Rating rationale

The transaction is performing in line with Scope’s delinquency and amortisation assumptions. Arrears of 90 or more days account for 1.53% of the total outstanding balance, and the conditional prepayment rate of the portfolio is 5.03%, according to the issuer report dated 15 June 2016. Credit enhancement has marginally increased for both Class A (27.2% of the performing asset balance, up from 25% at closing) and Class B (5.5% of the performing asset balance, up from 5% at closing). The Class A tranche life has gone down to 5.9 years from 6.3 years.

The ratings continue to factor Scope’s positive short-term macroeconomic outlook for Spain, which benefits the Class A notes. Scope assumes the Spanish recovery will continue in the short-term, although long-term uncertainty remains with labour market and fiscal imbalances, which could impact the Class B and Class C notes.

Class C is still performing but exposed to first portfolio losses with no credit enhancement and supported only by low excess spread (0.15%).

Portfolio performance

Scope has received quarterly reports, covering the first 12 months since the closing of the transaction.

Slow amortisation. The structure has amortised in line with Scope’s expectation, at 91.8% of the initial portfolio balance. The portfolio remains granular, with 19,095 mortgages outstanding. Scope expects the slow amortisation to continue because of the long maturity of the mortgages and the financial weakness of the obligors.

Moderate delinquencies. Delinquency levels are still building up and are currently below Scope’s base case assumption. Total delinquencies constitute 7.8% of the current balance, of which 57% relate to technical delinquencies of less than 30 days in arrears. Delinquencies of 90 days or more in arrears will continue to increase despite the high likelihood that technical delinquencies will subsequently be cured. The transaction still does not show objectively defaulted assets because of the long default definition (i.e. 18 months or more in arrears), but the servicer has already subjectively written off 0.05% of the initial balance.

Notes

FT RMBS SANTANDER 4 is a static true-sale Spanish securitisation of a portfolio of mortgages, originally EUR 2,950m, granted by Santander to both Spanish and non-Spanish residents. The assets were originated by Santander and Banesto, a banking franchise now fully integrated into Santander. The transaction closed on 26 June 2015 and the legal final maturity of the notes is on 15 September 2063.

Regulatory and legal disclosures

Important information
Information pursuant to Regulation (EC) No 1060/2009 on credit rating agencies, as amended by Regulations (EU) No. 513/2011 and (EU) No. 462/2013

Responsibility
The party responsible for the dissemination of the financial analysis is Scope Ratings AG, Berlin, District Court for Berlin (Charlottenburg) HRB 161306 B, Executive Board: Torsten Hinrichs (CEO), Dr. Stefan Bund and Dr. Sven Janssen.
The rating analysis has been prepared by Sebastian Dietzsch, Lead Analyst
Responsible for approving the rating: Carlos Terré, Committee Chair

Rating history
Instrument; ISIN; Date; Rating action; Rating
ES0305078000; 03.06.2015; Preliminary; (P) AA-_SF
ES0305078000; 26.06.2015; New; AA-(SF)
ES0305078018; 03.06.2015; Preliminary; (P) CC_SF
ES0305078018; 26.06.2015; New; CC(SF)
ES0305078026; 03.06.2015; Preliminary; (P) C_SF
ES0305078026; 26.06.2015; New; C_SF

Information on interests and conflicts of interest
The rating was prepared independently by Scope Ratings but for a fee based on a mandate of the issuer of the investment, represented by the management company.
As at the time of the analysis, neither Scope Ratings AG nor companies affiliated with it hold any interests in the rated entity or in companies directly or indirectly affiliated to it. Likewise, neither the rated entity nor companies directly or indirectly affiliated with it hold any interests in Scope Ratings AG or any companies affiliated to it. Neither the rating agency, the rating analysts who participated in this rating, nor any other persons who participated in the provision of the rating and/or its approval hold, either directly or indirectly, any shares in the rated entity or in third parties affiliated to it. Notwithstanding this, it is permitted for the above-mentioned persons to hold interests through shares in diversified undertakings for collective investment, including managed funds such as pension funds or life insurance companies, pursuant to EU Rating Regulation (EC) No 1060/2009. Neither Scope Ratings nor companies affiliated with it are involved in the brokering or distribution of capital investment products. In principle, there is a possibility that family relationships may exist between the personnel of Scope Ratings and that of the rated entity. However, no persons for whom a conflict of interests could exist due to family relationships or other close relationships will participate in the preparation or approval of a rating.

Key sources of information for the rating
Quarterly investor reports produced by Santander de Titulizacion SGFT SA, covering the first twelve months since the closing of the transaction up to the report dated June 2016; and proprietary information from Scope Ratings AG.
Scope Ratings considers the quality of the available information on the evaluated entity to be satisfactory. Scope ensured as far as possible that the sources are reliable before drawing upon them, but did not verify each item of information specified in the sources independently.

Examination of the rating by the rated entity prior to publication
Prior to publication, the rated entity was given the opportunity to examine the rating and the rating drivers, including the principal grounds on which the credit rating or rating outlook is based. The rated entity was subsequently provided with at least one full working day, to point out any factual errors, use of confidential information, or to appeal the rating decision and deliver additional material information. Following that examination, the rating was not modified.

Methodology
The methodology applicable for this rating is “General Structured Finance Rating Methodology”, dated August 2015. Scope also applied the principles contained in the call-for-comments paper “Rating Methodology for Counterparty Risk in Structured Finance Transactions”, dated August 2015. Both files are available on www.scoperatings.com. Additionally, the new issue report FT RMBS SANTANDER 4 – Rating Report explains the framework and assumptions for the recovery analysis Scope has performed.
The historical default rates of Scope Ratings can be viewed on the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s default rating, definitions of rating notations and further information on the analysis components of a rating can be found in the documents on methodologies on the rating agency’s website.

Conditions of use / exclusion of liability
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Rating issued by
Scope Ratings AG, Lennéstrasse 5, 10785 Berlin