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Fitch Upgrades 1 Greek Covered Bond Programme; Affirms 3 Others
June 26, 2017 / 3:56 PM / 6 months ago

Fitch Upgrades 1 Greek Covered Bond Programme; Affirms 3 Others

(The following statement was released by the rating agency) MILAN/LONDON, June 26 (Fitch) Fitch Ratings has taken rating actions on four Greek covered bonds programmes issued by Alpha Bank AE (Alpha, RD/RD/ccc), National Bank of Greece S.A. (NBG, RD/RD/ccc) and Piraeus Bank S.A. (Piraeus, RD/RD/ccc) as follows: - Alpha's mortgage covered bonds upgraded to 'B-' from 'CCC+'; Stable Outlook assigned - NBG's mortgage covered bonds Programme I (NBG I) affirmed at 'B-'; Outlook Stable - NBG's mortgage covered bonds Programme II (NBG II) affirmed at 'B-'; Outlook Stable - Piraeus's mortgage covered bonds affirmed at 'B-'; Outlook Stable The rating actions follow the upgrade of the Viability Ratings (VR) of Alpha, NBG and Piraeus to 'ccc' from 'f' on 19 June 2017 (see Fitch Affirms Greek Banks' IDRs at RD; Upgrades VRs available at and the full periodic review of the programmes. KEY RATING DRIVERS Country Ceiling and VRs The ratings of the covered bonds issued under the programmes are capped by Greece's Country Ceiling of 'B-'. At the same time, the 'B-' represents the rating floor for the programmes resulting from the VRs, as adjusted by the Issuer Default Rating (IDR) uplifts, and it is achievable irrespective of the levels of over-collateralisation (OC). Following the upgrade of the banks' VRs to 'ccc' from 'f', the starting point for the analysis is the 'ccc' VR in accordance with Fitch's Covered Bonds Rating Criteria. IDR Uplift Greek covered bonds are eligible for a maximum IDR uplift of two notches. The unchanged IDR uplift of two notches reflects that the issuers' Long-Term IDRs are not support-driven (neither institutional nor by the sovereign) as well as a low risk of under-collateralisation at the point of resolution. This is based on Fitch's assessment on the Greek legal framework, the presence of an asset monitor, asset eligibility criteria and minimum legal and contractual levels of OC, as applicable. Payment Continuity Uplift (PCU) The PCU is unchanged for all the programmes: six notches for NBG I and eight notches for NGB II, Alpha's and Piraeus's programmes due to the structural mechanisms that are in place to protect against cash flow mismatches between assets and liabilities. While NBG I has a soft bullet amortisation profile of the liabilities with a 12-months principal maturity extension, NGB II, Alpha and Piraeus covered bonds envisage a conditional pass-through feature that implies the covered bonds can amortise in line with the cover assets upon the extension of their principal maturity date. Moreover, each programme includes a liquidity reserve that covers at least three-month interest due on the covered bonds and senior expenses. Recovery Uplift The covered bonds are eligible for a recovery uplift as they are secured by standard Greek residential mortgage loans and therefore capable of generating at least good recovery prospects. NBG I, NBG II and Piraeus's programme are assigned a three-notch recovery uplift as the 25% OC Fitch relies on compensates for credit losses modelled in a stress scenario corresponding to the covered bonds' rating (7%, 14% and 14.3%, respectively). Alpha programme is assigned a one-notch recovery uplift as its relied-upon OC of 5.26% does not offset the 8.4% credit loss in the 'B-' rating scenario. The PCU and recovery uplift assigned to each covered bond programme are not a driver of the covered bonds ratings, as they are constrained by the 'B-' sovereign Country Ceiling. ALPHA Alpha's covered bonds are rated 'B-', two notches above the bank's VR of 'ccc'. This is based on an unchanged IDR uplift of two notches, an unchanged PCU of eight notches and a recovery uplift of one notch. The maximum legal asset percentage (AP) of 95% (5.26% equivalent OC) which Fitch relies upon in its analysis is in line with the 'B-' breakeven AP. The agency has assigned a Stable Outlook to Alpha's covered bonds, reflecting a stable cover pool composition. NBG NBG I and NBG II covered bonds are rated 'B-', two notches above the bank's VR of 'ccc', based on an unchanged IDR uplift of two notches, an unchanged PCU of six and eight notches, respectively, and a recovery uplift of three notches. The 80% contractual AP of both programmes (25% equivalent OC) which Fitch relies upon in its analysis provides more protection than the 95% 'B-' breakeven AP. The Stable Outlook on the covered bonds reflects a stable cover pool composition and the cushion provided by the committed OC against the 95% 'B-' breakeven AP. PIRAEUS Piraeus' covered bonds are rated 'B-', two notches above the bank's VR of 'ccc'. This is based on an unchanged IDR uplift of two notches, an unchanged PCU of eight notches and a recovery uplift of three notches. The contractual AP of 80% which Fitch relies upon in its analysis provides more protection than the 95% 'B-' breakeven AP. The Stable Outlook on the covered bonds reflects a stable cover pool composition and the cushion provided by the committed OC against the 95% 'B-' breakeven AP. RATING SENSITIVITIES Changes in Greece's Country Ceiling could affect the rating of all Greek covered bonds programmes. In particular and all else being equal, a higher sovereign Country Ceiling would trigger an upgrade by one notch for all programmes, factoring in the good recovery prospects, irrespective of the level of Fitch's relied-upon over-collateralisation. If the Country Ceiling is upgraded by two notches or more, the covered bond ratings could be upgraded correspondingly as long as the relied-upon OC of each programme is enough to compensate for the stresses commensurated with the Country Ceiling level. Alpha Bank AE's covered bonds ratings are vulnerable to a one-notch downgrade if the bank's VR is downgraded to 'cc' or below, all else being equal. Contact: Primary Analysts Sara De Novellis (Alpha, Piraeus) Analyst +39 02 879 087 295 Fitch Italia S.p.A. Via Morigi 6, 20123 Milan Alessandro Bosello (NBG I and NBG II) Analyst +39 02 879 087 278 Fitch Italia S.p.A. Via Morigi 6, 20123 Milan Secondary Analysts Alessandro Bosello (Alpha, Piraeus) Analyst +39 02 879 087 278 Roberto Del Ragno (NBG I and NBG II) Director +39 02 879 087 206 Committee Chairperson Juan David Garcia Senior Director +34 917 025 774 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: Additional information is available on Applicable Criteria Covered Bonds Rating Criteria (pub. 26 Oct 2016) here Criteria Addendum: Greece (pub. 28 Apr 2017) here Criteria for Country Risk in Global Structured Finance and Covered Bonds (pub. 26 Sep 2016) here EMEA RMBS Rating Criteria (pub. 29 Nov 2016) here Fitch's Interest Rate Stress Assumptions for Structured Finance and Covered Bonds - Excel File (pub. 17 Feb 2017) here Global Bank Rating Criteria (pub. 25 Nov 2016) here Global Structured Finance Rating Criteria (pub. 03 May 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 23 May 2017) here Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 17 Feb 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy 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 WEB SITE AT 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. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. 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