OREANDA-NEWS. June 17, 2015. Fitch Ratings has assigned Penarth Master Issuer plc's series 2015-2 notes final ratings as follows:

Series 2015-2 A1: 'AAAsf'; Outlook Stable
Series 2015-2 A2: 'AAAsf'; Outlook Stable

The notes are backed by UK credit card receivables originated by the Bank of Scotland plc (BoS; A+/Stable/F1) and Lloyds Bank plc (Lloyds; A+/Stable/F1).

Fitch has simultaneously affirmed the following tranches:

USD750m Series 2015-1 A1 affirmed at 'AAAsf'; Outlook Stable
GBP500m Series 2015-1 A2 affirmed at 'AAAsf'; Outlook Stable
GBP500m Series 2014-2 A1 affirmed at 'AAAsf'; Outlook Stable
GBP150m Series 2014-1 A1 affirmed at 'AAAsf'; Outlook Stable
GBP500m Series 2014-1 A2 affirmed at 'AAAsf'; Outlook Stable
USD750m Series 2013-1 A1 affirmed at 'AAAsf'; Outlook Stable
GBP1,300m Series 2013-1 A2 affirmed at 'AAAsf'; Outlook Stable
GBP600m Series 2014-2 B1: affirmed at 'Asf'; Outlook Stable
GBP120m Series 2014-2 C1: affirmed at 'BBB+sf'; Outlook Stable
GBP500m Series 2014-2 D1: 'NRsf'

KEY RATING DRIVERS
Firm Asset Performance
Fitch has maintained the base case charge-off expectation for the Penarth trust at 7.0%, which is at the median of the range (4.5% to 8.0%) assigned in similar transactions. The agency's base case assumptions for the trust's monthly payment rate (18%) and yield rate (16%) also remain unchanged since the most recent issuance review in March 2015.

Originator Links
The asset performance is closely linked to the performance of the originator due to the revolving nature of the underlying assets relative to the amortising receivables. Fitch conducted an annual review of the underwriting and servicing processes at BoS and Lloyds in December 2014. The policies and procedures of both were satisfactory at the latest visit, as were implementation and controls.

Interchange Cap Impact
Fitch has expected regulatory pressure on interchange fees for some time and therefore has not given full credit to interchange revenue when setting its base case yield assumption. EU regulation will cap interchange fees at 0.3% (the UK average is 0.9%) of transacted amounts, and is due to come into force later this year.

We applied no additional yield stress in the analysis, as the impact of the cap will also depend on any second-order effects on cardholder composition, payment behaviour, and any countermeasures originators might implement. Fitch will continue to assess any pressure on yield resulting from regulatory and competitive forces.

US Dollar Swap Counterparty
The 2015-2 A1 notes are denominated in US dollars, while the credit card receivables are denominated in sterling. The issuer entered into a cross-currency swap with Wells Fargo Bank to hedge the currency risk.

Fitch does not consider the subordination clause for swap termination payments to be enforceable should Wells Fargo Bank default as it is a US entity. This corresponds to the minimum rating eligibility (BBB+/F2) for the swap counterparty under Fitch's criteria. Further mitigating factors in line with Fitch's criteria address counterparty risk.

Stable Asset Outlook
The performance of credit card trusts continued to improve throughout 2Q15, with charge-off rates improving. Delinquency levels remained largely unchanged, while payment and yield rates declined (see Credit Card Index - UK 2Q15).

Fitch revised its GDP growth forecast to 2.5% in its March Global Economic Outlook, from 2.6% for 2015 and kept the forecast of 2.3% for 2016. The agency believes annual UK unemployment for 2015 and 2016 will stay stable and drop from 5.6% forecast for 2015 to 5.5% in 2016. Fitch therefore maintains its stable outlook for UK credit card debt.

RATING SENSITIVITIES
Rating sensitivity to increased charge-off rate
Class A current rating (base case: 7.0%): 'AAAsf'
Increase base case by 25%for Class A: 'AA+sf'
Increase base case by 50%for Class A: 'AA+sf'
Increase base case by 75%for Class A: 'AAsf'

Rating sensitivity to reduced MPR
Class A current rating (base case: 18%): 'AAAsf'
Reduce base case by 15% for Class A: 'AA+sf'
Reduce base case by 25% for Class A: 'AA+sf'
Reduce base case by 35% for Class A: 'AAsf'

Rating sensitivity to reduced purchase rate (ie aggregate new purchases divided by aggregate principal repayments in a given month)
Class A current rating (base case: 100%): 'AAAsf'
Reduce base case by 50% for Class A: 'AAAsf'
Reduce base case by 75% for Class A: 'AA+sf'
Reduce base case by 100% for Class A: 'A+sf'

Rating sensitivity to increased charge-off rate and reduced MPR
Class A current rating: 'AAAsf'
Increase charge-off rate by 25% and reduce MPR by 15% for Class A: 'AA+sf'
Increase charge-off rate by 50% and reduce MPR by 25% for Class A: 'A+sf'
Increase charge-off rate by 75% and reduce MPR by 35% for Class A: 'A-sf'

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis.

The agency received a third-party data quality confirmation. Fitch believes the sample size and relevance of the tested fields suggest the originator provided an acceptable quality of data.
Fitch also conducted a review of a small targeted sample of the originator's origination files during its last originator review in December 2014. The agency found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Historical performance data for the trust provided by Lloyds Bank plc from October 2008 to March 2015
- Stratifications of the trust provided by Lloyds Bank as at 31 March 2015
- Stratifications of June 2015 account additions provided by Lloyds Bank as at 01 June 2015
- Summary of credit cardholder deposits for Lloyds Bank plc and Bank of Scotland plc provided by Lloyds Bank plc
- Investor Reports provided by Lloyds Bank plc as at 30 April 2015

MODELS
For the initial rating analysis, Fitch received historical performance data for the trust and total book and portfolio stratifications for the trust from Lloyds Bank plc and Bank of Scotland plc. Subsequent trust portfolio performance is provided on a monthly basis to Fitch for surveillance purposes. Fitch assessed the transaction cash flows using its proprietary credit card ABS cash flow model, further described in 'Global Credit Card ABS Rating Criteria '.

REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the new issue report (see Penarth Master Issuer plc - 2015-2 Delinked Notes - Appendix, dated 11 June 2015at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 26 March 2015 available on the Fitch website.