London, 08 October 2011 -- Moody's Investors Service has today taken the following rating actions
on covered bonds issued by various Portuguese banks, prompted by
Moody's downgrades on 7 October 2011 of the senior unsecured ratings
of the banks supporting the affected covered bond programmes:
- Mortgage covered bonds issued by Banco BPI (BPI): downgraded
to Baa3; previously, on 15 July 2011 downgraded to A3 on review
for downgrade
- Public-sector covered bonds issued by Banco BPI (BPI):
downgraded to Baa3; previously, on 15 July 2011 downgraded
to A3 on review for downgrade
- Mortgage covered bonds issued by Banco Santander Totta (BST):
downgraded to A2; previously, on 20 September 2011 downgraded
to A1 on review for downgrade
- Mortgage covered bonds issued by BANIF - Banco Internacional
do Funchal, S.A. (Banif): ratings confirmed
at Baa3; previously, on 29 July 2011 assigned Baa3 on review
for downgrade
- Mortgage covered bonds issued by Caixa Economica Montepio Geral
(Montepio): ratings confirmed at Baa3; previously, on
15 July 2011 downgraded to Baa3 on review for downgrade
- Mortgage covered bonds issued by Banco Comercial Portugues,
S.A. (BCP): ratings confirmed at Baa3; previously,
on 15 July 2011 downgraded to Baa3 on review for downgrade
- Mortgage covered bonds issued by Banco de Investimento Imobiliário,
S.A. (BII): ratings confirmed at Baa3; previously,
on 15 July 2011 downgraded to Baa3 on review for downgrade
- Mortgage covered bonds issued by Banco Espirito Santo,
S.A. (BES): ratings confirmed at Baa3; previously,
on 15 July 2011 downgraded to Baa3 on review for downgrade
- Mortgage covered bonds issued by Caixa Geral de Depósitos
(CGD): ratings confirmed at Baa3; previously, on 15 July
2011 downgraded to Baa3 on review for downgrade
- Public sector covered bonds issued by CGD: ratings confirmed
at Baa3; previously, on 15 July 2011 downgraded to Baa3 on
review for downgrade.
RATINGS RATIONALE
Today's rating actions on the covered bonds follow Moody's downgrade on
7 October 2011 of the relevant issuer's senior unsecured ratings.
For further information, please refer to "Moody's takes rating
actions on Portuguese banks; outlook negative" published 7
October 2011. These rating actions on the issuers conclude the
review for downgrade that Moody's initiated on 15 July 2011,
following the downgrade of the rating of the Republic of Portugal to Ba2
from Baa1. For further information, please refer to "Moody's
takes rating actions on Portuguese banks further to sovereign downgrade"
published on 15 July 2011 and "Moody's downgrades Portugal to Ba2 with
a negative outlook from Baa1" published on 5 July 2011.
Based on the current Timely Payment Indicator (TPI) of "Very Improbable"
for BPI, BST, Montepio, BCP, BII, BES,
CGD, and "Probable-High" for Banif, the
combination of the lower issuer ratings and TPIs now constrains the ratings
of the covered bonds of the following programmes as follows:
- BPI's mortgage covered bond ratings capped at Baa3, given
BPI's long-term unsecured debt of Ba2
- BPI's public-sector covered bond ratings capped at Baa3,
given BPI's long-term unsecured debt rating of Ba2
- BST's mortgage covered bond ratings capped at A1,
given BST's long-term unsecured debt rating of Baa2
- BCP's mortgage covered bond ratings capped at Baa3, given
BCP's long-term unsecured debt rating of Ba3
- BII's mortgage covered bond ratings (guaranteed by BCP) capped
at Baa3, given BCP's (guarantor) long-term unsecured
debt rating of Ba3
- BES's mortgage covered bond ratings capped at Baa3, given
BES's long-term unsecured debt rating of Ba2
- CGD's mortgage covered bond ratings capped at Baa3, given
CGD's long-term unsecured debt rating of Ba2
- CGD's public-sector covered bond ratings capped at Baa3,
given CGD's long-term unsecured debt rating of Ba2
-Montepio's mortgage covered bond ratings capped at Baa3,
given Montepio's long-term unsecured debt rating of Ba3
- Banif's mortgage covered bond ratings capped at A3,
given Banif's long-term unsecured debt rating of Ba3
Furthermore, for BST and Banif, the covered bond ratings are
assigned below their above-mentioned respective TPI Caps,
because the current level of over-collateralisation available within
the programmes is lower than that necessary to attain a higher rating.
Today's ratings actions on the covered bonds reflect Moody's
analysis of the negative impact caused by the downgrades of the issuers
ratings through a two step process:
(1) Expected Loss
Moody's expected loss analysis is negatively affected by the downgrade
of the issuer's rating. As the credit strength of the issuer is
incorporated into Moody's expected loss methodology, any downgrade
of the issuer's ratings will increase the expected loss on the covered
bonds.
(2) Timely Payment Indicators
The current TPI for BPI, BST, Montepio, BCP, BII,
BES, CGD is "Very Improbable". The current TPI for Banif
is "Probable-high", due to structural features
that mitigate some of the refinancing risk that exists in some of the
other Portuguese covered bond programmes. Under the TPI framework,
the covered bond ratings are capped if any of the senior unsecured ratings
of the issuers are downgraded below a certain level. Moody's will
assess whether the weakened credit position of the banks reflected in
the recent downgrades has materially reduced the likelihood that the financial
system would be willing and able to support the refinancing of the covered
bonds of any defaulted bank.
RATING METHODOLOGY
Moody's rating for any covered bond is determined after applying a two-step
process:
(1) Moody's determines a rating based on the expected loss on the bond.
This is modeled as a function of the issuer's probability of default and
the stressed losses on the cover pool assets following issuer default;
and
(2) Moody's assigns a TPI, which indicates the likelihood that timely
payment will be made to covered bondholders following issuer default.
The effect of the TPI is to limit the covered bond rating to a certain
number of notches above the issuer's rating.
The methodologies used in these rating were Moody's Rating Approach to
Covered Bonds, published in March 2010, and Assessing Swaps
as Hedges in the Covered Bond Market, published in December 2009.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
The rating assigned by Moody's addresses the expected loss posed to investors.
Moody's ratings address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed, but may have
a significant effect on yield and to investors.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's Analytics
information.
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not an auditor
and cannot in every instance independently verify or validate information
received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the credit rating action. Please see the
special report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure page
on our website www.moodys.com for further information.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Sang Shin
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades multiple Portuguese covered bond ratings
