April 1, 2014 / 5:17 PM / 3 years ago

Fitch Affirms Portuguese Covered Bonds on Criteria Amendments

(The following statement was released by the rating agency) MILAN/LONDON, April 01 (Fitch) Fitch Ratings has affirmed the ratings of six Portuguese covered bond programmes with Negative Outlook, following the implementation of the agency's revised Covered Bonds Rating Criteria on programmes issued by Portuguese banks. For all programmes except that of Banco Santander Totta, S.A., the rating action also takes into account the relevant Negative Outlooks on banks' Issuer Default Ratings (IDR) announced by Fitch on 26 March 2014 (see "Fitch Revises Outlooks on 18 EU Commercial Banks to Negative on Weakening Support" and "Fitch Revises Outlooks on 18 EU State-sponsored Banks to Negative on Weakening Support" on www.fitchratings.com). As part of its updated covered bonds analysis, the agency has assigned IDR uplifts to each programme, where applicable. KEY RATING DRIVERS The rating of Obrigacoes Hipotecarias (OH) issued by Banco BPI (BPI; BB+/Negative/B) is affirmed at 'BBB+'/Negative, based on the bank's IDR of 'BB+', a newly assigned IDR uplift of '0', an unchanged D-Cap of '0' (full discontinuity risk) and a breakeven overcollateralisation (OC) of 32.5% for a 'BBB+' rating. The Negative Outlook on the OH reflects that on the bank's IDR and risks to the evolution of the Portuguese residential mortgage market. The rating of OHs issued by of Banco Comercial Portugues S.A. (BCP; BB+/Negative/B) is affirmed at 'BBB-'/Negative, based on the bank's IDR of 'BB+', a newly assigned IDR uplift of '1', an unchanged D-Cap of '0' (full discontinuity risk) and a breakeven OC of 26% for a 'BBB-' rating. The Negative Outlook on the OH reflects that on the bank's IDR and that a potential downgrade of the IDR may not be entirely compensated by the IDR uplift. The Outlook also factors in risks to the evolution of the Portuguese residential mortgage market. The rating of OH issued by Caixa Economica Montepio Geral (Montepio; BB/Negative/B) is affirmed at 'BBB'/Negative, based on the bank's IDR of 'BB', a newly assigned IDR uplift of '0', an unchanged D-Cap of '0' (full discontinuity risk) and a breakeven OC of 26% for a 'BBB' rating. The Negative Outlook on the OH reflects that on the bank's IDR and risks to the evolution of the Portuguese residential mortgage market. The rating of OH issued by Caixa Geral de Depositos S.A.'s (CGD; BB+/Negative/B) is affirmed at 'BBB'/Negative, based on the bank's IDR of 'BB+', a newly assigned IDR uplift of '2', an unchanged D-Cap of '0' (full discontinuity risk) and a breakeven OC of 20.5% for a 'BBB' rating. The Negative Outlook on the OH reflects that on risks to the evolution of the Portuguese residential mortgage market. The rating of Obrigacoes sobre o sector public (OSP) issued by Caixa Geral de Depositos S.A.'s (CGD; BB+/Negative/B) is affirmed at 'BBB-'/Negative, based on the bank's IDR of 'BB+', a newly assigned IDR uplift of '2', an unchanged D-Cap of '0' (full discontinuity risk) and a breakeven OC of 45% for a 'BBB-' rating. The Negative Outlook on CGD's OSP takes into account that the current level of OC would not be sufficient to withstand stresses at rating levels significantly above the IDR of the Portuguese sovereign (BB+/Negative/B) and reflects the Outlook on the Portuguese sovereign. The rating of OH issued by Banco Santander Totta S.A. (Totta; BBB-/Negative/F3) is affirmed at 'BBB'/Negative, based on the bank's IDR of 'BBB-', a newly assigned IDR uplift of '0', an unchanged D-Cap of '0' (full discontinuity risk) and a breakeven OC of 12% for a 'BBB' rating. The Negative Outlook on the OH reflects that on the bank's IDR and risks to the evolution of the Portuguese residential mortgage market. The IDR uplift expresses Fitch's judgement of the degree of protection in the event of a bank's resolution that would be available to prevent the source of covered bonds payments switching from the issuer to the cover pool. It is derived from the following factors: Fitch's opinion of the relative ease and motivations for resolution methods other than liquidation, the importance of covered bonds to the financial markets in a given jurisdiction and the extent of buffer offered by senior unsecured debt. Fitch's view on the use of resolution methods other than liquidation contributes to the IDR uplift assigned to the programmes of BCP and CGD based on their large size in their domestic market. Protection from the level of senior unsecured debt is also reflected in the IDR uplift assigned to the mortgage covered bonds of CGD. This is based on Fitch's estimate of long-term non-retail placed senior unsecured debt exceeding 5% of total adjusted assets on the latest available financial information. Portugal is not considered by Fitch to be a covered bond-intensive jurisdiction. RATING SENSITIVITIES BPI OH: The 'BBB+' rating of the OH is vulnerable to a downgrade if among others the bank's IDR is downgraded by one or more notches.. BCP OH: The 'BBB-' rating of the OH is vulnerable to a downgrade if among others the bank's IDR is downgraded by two or more notches. Montepio OH: The 'BBB' rating of the OH is vulnerable to a downgrade if among others the bank's IDR is downgraded by one or more notches. CGD OH: The 'BBB' rating of the OH is vulnerable to a downgrade if among others the bank's IDR is downgraded by three or more notches. CGD OSP: The 'BBB-' rating of the OSP is vulnerable to a downgrade if among others any of the following occurs: (i) the bank's IDR is downgraded by three or more notches; (ii) the Portuguese sovereign is downgraded by one notch. Totta OH: The 'BBB' rating of the OH is vulnerable to a downgrade if among others the bank's IDR is downgraded by one or more notches. Contact: Primary Analyst Anastasiya Kapustina Analyst +44 20 3530 1516 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Roberto Del Ragno Analyst +39 02 87 90 87 206 Committee Chairperson Federica Fabrizi Senior Director +39 02 87 90 87 232 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: christian.giesen@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Covered Bonds Rating Criteria', dated 10 March 2014, 'Counterparty Criteria for Structured Finance and Covered Bonds', dated 13 May 2013, 'Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum', dated 13 May 2013, 'EMEA RMBS Master Rating Criteria' dated 6 June 2013, 'EMEA Criteria Addendum - Portugal', dated 30 July 2013, 'Asset Analysis Criteria for Covered Bonds of European Public Entities', dated 30 January 2013, 'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds', dated 23 January 2014, 'Covered Bonds Rating Criteria - Public Sector Liquidity and Refinancing Stress Addendum', dated 7 February 2014 and 'Covered Bonds Rating Criteria - Mortgage Liquidity and Refinancing Stress Addendum', dated 4 February 2014 are available at www.fitchratings.com. Applicable Criteria and Related Research: Covered Bonds Rating Criteria here Covered Bonds Rating Criteria – Mortgage Liquidity and Refinancing Stress Addendum here Covered Bonds Rating Criteria – Public Sector Liquidity and Refinancing Stress Addendum here Counterparty Criteria for Structured Finance and Covered Bonds here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum here EMEA RMBS Master Rating Criteria here EMEA Criteria Addendum – Portugal here Asset Analysis Criteria for Covered Bonds of European Public Entities here Criteria for Interest Rate Stresses in Structured Finance Transactions here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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