Fitch Confirms Prelios Credit Servicing's Rating as Special Servicer for 2024
Fitch Ratings has confirmed the RSS1- and CSS1- ratings for Prelios Credit Servicing as a Special Servicer for residential and commercial mortgage loans, respectively, for 2024. The rating follows Fitch's review of the activities carried out and the operating system, and has also included Prelios Credit Solutions in the scope of analysis as a special servicer sub-delegated by Prelios Credit Servicing for recovery activities.
The confirmation of the Rating reflects the continuous achievement of strategic objectives and the demonstrated expertise in portfolio management, in line with what was already noted in the previous report.
Fitch appreciated the strengthening of control functions, the creation of the Risk Committee and the various projects aimed at optimizing credit management, including through predictive models.
Finally, the introduction of new controls relating to the monitoring of all phases of the credit management process was recognized as a further positive element. In conclusion, Fitch revised the outlook from Stable to Evolving, considering the challenges that the Company will face in the near future.
S&P Global Ratings raised the Prelios Credit Servicing rating for Special Servicing activities from "Above Average" to "Strong”
S&P Global Ratings raised its overall rankings to STRONG from ABOVE AVERAGE on Prelios Credit Servicing S.p.A. as a special servicer and confirmed ABOVE AVERAGE on the master servicer activities. The outlook on each ranking is stable.
The rating improvement reflects the consolidation of the company's position in the Italian master and special servicing markets, supported by continued investments in technology.
The positive evaluation includes the servicer's long track record in managing its nonperforming loan (NPL) and unlikely-to-pay loan (UTP) portfolios, the implementation of artificial intelligence solutions which helps to drive efficiencies and manage risk, and the reinforcement of the cybersecurity framework and controls.
The rankings reflect also the organizational changes, such as the new central business unit dedicated to real estate owned assets, and the separation of Risk and Compliance functions that have further strengthened the second line of defense.
Additionally, the distinguishing factors considered include also the significant volumes of assets under management for NPL and UTP, and the benefit of having a proprietary IT platform dedicated to UTP credits, which was developed ahead of other competitors.
Fitch affirms Prelios's Special Servicer Ratings and assigns Stable Outlooks
Fitch Ratings has affirmed Prelios Credit Servicing’s Residential and Commercial Special Servicer Ratings at ‘RSS1-’ and ‘CSS1-’, respectively, and assigned Stable Outlooks. The affirmation follows Fitch’s review of Prelios’s business and operations, and reflects its robust defaulted loan management processes and controls, as well as its corporate governance structure, which are both in line with Fitch’s definition of ‘highest level of proficiency’.
Fitch’s report states Prelios Credit Servicing (PRECS) continues to meet its strategic objectives in its growth in UTP business: at end-September 2022, the UTP portfolio stood at EUR10 billion, up 28% from EUR7.8 billion at end-2020.
Fitch has stated that, in order to facilitate the growth in the UTP portfolio, Prelios Credit Servicing separated UTP loan management from the NPL workout teams and created a unit which is dedicated to managing UTP loans whose performance has deteriorated, leading to their reclassification to NPL.
Fitch scored Prelios’s company experience as commensurate with the ‘1’ rating category as per its Criteria for Rating Loan Servicers and remarks that Prelios’s senior and middle management have significant experience in servicing, banking and law - on average 25 and 19 years, respectively - and that Prelios Credit Servicing’s control framework follows the three lines of defence, which is considered industry best practice (Fitch assessed as commensurate with the ‘1’ rating category).
According to Fitch “Prelios’s processes and controls for defaulted loan management are well defined and remain commensurate with the ‘1’ rating category.” Prelios Credit Servicing “has sound IT systems, with separate servicing platforms for NPL and UTP management.”
S&P improves the Prelios Credit Servicing outlook for Special Servicing activities from "stable" to "positive"
S&P confirms the "above average" rating for the Master and Special Servicing activities, improving the outlook for the latter from "stable" to "positive".
The rating and the outlook improvement reflect PCS'ability to leverage the Group's real estate expertise and service offering, including brokerage,property management, and valuations; the ability to deliver and absorb substantial business and staff growth; the leadership position in the Italian UTP market, as reflected by its management of the largest Italian UTP overall portfolio serviced by a third-party servicer,
The executive team that is well-experienced in the Italian servicing market; the updated policies and procedures (P&Ps) that reflect recent organizational changes, the well-designed internal controls (IC) framework, including PCS IC functions that are part of the servicer's organization and PRECSO IC functions provided by the Group; the proprietary IT systems, which are frequently updated and effectively support the master and the special servicing workflows and boarding activity, as well as newly implemented artificial intelligence solutions; sound reporting ability for internal and external purposes, further enhanced by the creation of a dedicated reporting team, which allows good control over the servicer's ongoing activity.
Fitch upgraded Prelios Credit Servicing S.p.A.’s rating, as a special servicer of NPE portfolios by assigning RSS1- and CSS1- from RSS2 + and CSS2 +, respectively (June 2021)
The rating upgrade reflects the enhancements achieved in the credit recovery and administration activities and the Company's ability to deliver on the business objectives i.e. the growth in assets, set-up of the department dedicated to the management of UTPs, recognized by Fitch at the highest level of competence.
The enhancements are also attributable to the solid risk governance and technology management adopted by Prelios Credit Servicing, such as artificial intelligence, chat-bot, systems dedicated to NPL - Phoenix - and UTP - Pegaso, which are considered in the "1" rating category.
Fitch also recognizes the "1" rating category to the on-boarding process, the automatic generation of business plans, contractual reporting and the significant experience of senior and middle management. Prelios Credit Servicing S.p.A. manages NPL and UTP assets, with some servicing activities outsourced to its sister company Prelios Credit Solutions S.p.A. (PreCSo), whose activities are included in the scope of the Prelios Credit Servicing S.p.A. rating.
Fitch has confirmed its “RSS2+” and “CSS2+” ratings for Prelios Credit Servicing (PRECS) as a special servicer of residential and commercial mortgage loans in Italy (March 2019)
Fitch’s decision to confirm its ratings reflects:
- The audited financial accounts for the three years to 2018 show an unleveraged, stable and profitable company
- The robust boarding process which, thanks to detailed quality controls and rigorous boarding times, has allowed the Company to acquire important volumes guaranteeing the quality of the service
- The quality and efficiency of the IT system (Phoenix), which allows (i) the processing and automatic monitoring of the Business Plans, (ii) the recording on a single system of the judicial and extrajudicial activities carried out for the recovery of credit from all professionals involved (loan managers, lawyers, technicians, real estate advisors, master servicers, etc.), (iii) the registration of cadastral data and the values of property guarantees and (iv) the automatic checks on the consistency and completeness of the information with the generation of alerts
- The efficient centralized management of suppliers and other functions that allow the Company to leverage on Prelios Group’s experience
- The presence of the three lines of Control as well as the introduction of a Risk Appetite Framework system that responds to the need to take and manage the risks associated with lending with awareness, standardizing the monitoring processes
- The quality of the Business Continuity and Disaster Recovery Plan which enabled effective management of the coronavirus pandemic
- Adequate cybersecurity and information security processes, which include regular penetration testing and vulnerability assessments
Fitch ratings RSS2+/CSS2+ (October 2018)
Fitch has confirmed its “RSS2+” and “CSS2+” ratings for Prelios Credit Servicing (PRECS) as a special servicer of residential and commercial mortgage loans in Italy.
Fitch’s decision to confirm its ratings reflects:
- the continual attainment of objectives by PRECS, which, over the last few years, has expanded its portfolio of secured instruments by almost one third in terms of value and 60% in terms of the number of loans;
- constant cost controls and the awarding of new mandates, which have generated a significant improvement in the company's key financial indicators;
- an important range of incentives and implementation of personnel loyalty programs, which has led to a notable reduction in turnover over the last two years;
- a robust boarding process, including detailed quality controls and rigorous activity plans;
- the mix of methods adopted for recovery of judicial and non-judicial credit, which has enabled PRECS to secure good average recovery rates;
- the recent inspection by the Bank of Italy, without the opening of any procedures;
- the introduction of a Risk Appetite Framework system to meet the need to assume and manage loan-related risks in an efficient manner, with uniform monitoring processes.
Standard & Poor’s, rating ABOVE AVERAGE (August 2018) as residential and retail mortgage loans special and master servicer.
The rating of the company Prelios Credit Servicing (PRECS) is based on the following aspects:
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Fitch RSS2 + / CSS2 + (June 2017)
Fitch has confirmed the Company’s rating: “RSS2+” e “CSS2+” as special servicer of Italian residential and commercial mortgage.
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Standard & Poor’s, rating ABOVE AVERAGE (February 2017):
Standard & Poor's confirms the rating ABOVE AVERAGE as special servicer of residential and commercial mortgages and, at the same time, we have affirmed the rating ABOVE AVERAGE as master servicer of residential mortgages, commercial mortgages as well as unsecured loans in Italy.
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Fitch RSS2 + / CSS2 + (June 2016)
Upgraded the Fitch rating of Prelios Credit Servicing (PRECS) passing by "RSS2" and "CSS2" to "RSS2 +" and "CSS2 +" as a special servicer of italian residential and commercial mortgage.
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