Fitch Upgrades Credito Fondiario's Italian Servicer Ratings
The upgrades reflect the successful implementation of a new corporate strategy following the company's restructure in 2013, which has stabilised the business and resulted in continued and well-managed growth.
A new CEO was appointed in November 2015, replacing the previous incumbent who had been in the role for less than two years. The new CEO has been involved in the servicer's operations since October 2013 and is a board member of CF's largest shareholder, which in Fitch's view provides continuity. Fitch considers high turnover at the executive level to be an operational risk as it can impact a servicer's ability to achieve its strategic goals.
The senior management team has been restructured to reflect the new organisational model. A new COO was appointed, and a new general counsel role was created to oversee legal and governance activities. Both positions were filled with new hires with significant industry experience. The average industry experience across the senior management team has remained stable and is high compared with peers.
The number of operational employees has increased 50% (21 people) year-on-year and the servicing teams have been restructured to support CF's expansion and diversification of activities. The average industry experience across the teams remains high compared with peers, demonstrating the quality of new hires.
The average number of training hours delivered per employee continues to improve, and is in line with rated peers, which is reflected in the ratings.
CF has implemented two new HR applications to improve automation and control around performance and development processes. As at the time of the review a full annual cycle had not yet been completed using the new applications Fitch therefore could not fully assess their impact.
Neither CF nor its shareholders are Fitch-rated financial institutions. The servicer's financial results have shown an improving trend over the past three years, with a small profit reported for end-2014. The servicer has been able to successfully implement its new business plan, due to the financial support from shareholders, which in Fitch's view contributes to the long-term viability of the company.
CF agreed a number of new servicing mandates in the last 12 months, although this included only one commercial and no residential primary servicer instruction. The primary servicing portfolio has reduced significantly year-on-year, although overall the number of loans under management has remained stable. Fitch views the current primary portfolio size as adequate; however, a decline may have a negative impact on the servicer ratings. In Fitch's view CF's diversified activities support the servicer's sustainability over the medium term.
The ratings further reflect CF's completed migration of all loans to a new third-party integrated servicing platform, replacing a number of different applications with this single system. The new platform improves efficiency and oversight through embedded decision-making controls and automation of key processes.
As of end-December 2015 CF was primary servicer on six residential and commercial portfolios (end-June 2014: six) consisting of 1,070 live loans (1,454 loans) with a total value of EUR252.4m (EUR640m).
The servicer is responsible, in various capacities, for administration or reporting on a total of 27 deals (end-June 2014: 24 deals), excluding balance sheet loans. The total portfolio volume for which CF is involved in some capacity is EUR3.83bn (EUR4.4bn), with the number of loans under management at 413,759 loans (409,312).
The rating action commentary is based on information provided to Fitch as of end-December-2015, unless stated otherwise.
Fitch employed its global servicer rating criteria in analysing the servicer's operations and financial condition, including a comparison against similar Italian servicers as part of the review process.
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