Paris, December 24, 2019 -- Moody's Investors Service ("Moody's") has today confirmed the Baa3
rating assigned to Banca Carige S.p.A. - Mortgage
Covered Bonds (residential), the Baa1 rating assigned to Banca Carige
S.p.A. - Mortgage Covered Bonds (commercial)
and the A2 rating assigned to Banca Carige S.p.A.
Mortgage Covered Bond Programme 3 (CPT), all issued by Banca Carige
S.p.A. (the issuer or Banca Carige) (deposits Caa1;
adjusted baseline credit assessment caa1; counterparty risk (CR)
assessment B2(cr)) and governed by the Italian covered bond legislation.
This rating action concludes the review with direction uncertain of the
ratings of Banca Carige's three covered bonds programmes, which
was initiated on 15 January 2019 (please see http://www.moodys.com/viewresearchdoc.aspx?docid=PR_393790).
RATINGS RATIONALE
This rating action follows Moody's decision to confirm Banca Carige's
Counterparty Risk (CR) Assessment at B2(cr).
For further details on the rating actions on Banca Carige, please
refer to Moody's press release: (https://www.moodys.com/research/Moodys-upgrades-Banca-Carige-following-the-capital-increase-and-the--PR_414970).
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step
process: an expected loss analysis and a TPI framework analysis.
EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL)
to determine a rating based on the expected loss on the bond. COBOL
determines expected loss as (1) a function of the probability that the
issuer will cease making payments under the covered bonds (a CB anchor
event); and (2) the stressed losses on the cover pool assets following
a CB anchor event.
The CB anchor for the programmes is CR assessment plus 1 notch.
- The cover pool losses for Banca Carige S.p.A.
- Mortgage Covered Bonds (residential) are 17.2%.
This is an estimate of the losses Moody's currently models following a
CB anchor event. Moody's splits cover pool losses between market
risk of 11.9% and collateral risk of 5.4%.
Market risk measures losses stemming from refinancing risk and risks related
to interest-rate and currency mismatches (these losses may also
include certain legal risks). Collateral risk measures losses resulting
directly from cover pool assets' credit quality. Moody's derives
collateral risk from the collateral score, which for this programme
is currently 8.0%.
The over-collateralisation in the cover pool is 42.5%,
of which Banca Carige provides 22% on a "committed" basis.
The minimum OC level consistent with the Baa3 rating target is 0.5%.
These numbers show that Moody's is not relying on "uncommitted" OC in
its expected loss analysis.
- The cover pool losses for Banca Carige S.p.A.
- Mortgage Covered Bonds (commercial) are 21.1%.
This is an estimate of the losses Moody's currently models following a
CB anchor event. Moody's splits cover pool losses between market
risk of 10.8% and collateral risk of 10.3%.
Market risk measures losses stemming from refinancing risk and risks related
to interest-rate and currency mismatches (these losses may also
include certain legal risks). Collateral risk measures losses resulting
directly from cover pool assets' credit quality. Moody's derives
collateral risk from the collateral score, which for this programme
is currently 15.4%.
The over-collateralisation in the cover pool is 112.8%,
of which Banca Carige provides 32% on a "committed" basis.
The minimum OC level consistent with the Baa1 rating target is 11%.
These numbers show that Moody's is not relying on "uncommitted" OC in
its expected loss analysis.
- The cover pool losses for Banca Carige S.p.A.
Mortgage Covered Bond Programme 3 (CPT) are 21.4%.
This is an estimate of the losses Moody's currently models following a
CB anchor event. Moody's splits cover pool losses between market
risk of 16.4% and collateral risk of 5%. Market
risk measures losses stemming from refinancing risk and risks related
to interest-rate and currency mismatches (these losses may also
include certain legal risks). Collateral risk measures losses resulting
directly from cover pool assets' credit quality. Moody's derives
collateral risk from the collateral score, which for this programme
is currently 7.5%.
The over-collateralisation in the cover pool is 45.3%,
of which Banca Carige provides 20.5% on a "committed" basis.
The minimum OC level consistent with the A2 rating target is 17.5%.
These numbers show that Moody's is not relying on "uncommitted" OC in
its expected loss analysis.
For further details on cover pool losses, collateral risk,
market risk, collateral score and TPI Leeway across covered bond
programmes rated by Moody's please refer to "Covered Bonds Sector Update",
published quarterly.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator"
(TPI), which measures the likelihood of timely payments to covered
bondholders following a CB anchor event. The TPI framework limits
the covered bond rating to a certain number of notches above the CB anchor.
For Banca Carige S.p.A. - Mortgage Covered
Bonds (residential), Moody's has assigned a TPI of Probable.
For Banca Carige S.p.A. - Mortgage Covered
Bonds (commercial), Moody's has assigned a TPI of Probable-High.
For Banca Carige S.p.A. Mortgage Covered Bond Programme
3 (CPT), Moody's has assigned a TPI of Very High.
RATING METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Covered Bonds" published in February 2019.
Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The CB anchor is the main determinant of a covered bond programme's rating
robustness. A change in the level of the CB anchor could lead to
an upgrade or downgrade of the covered bonds. The TPI Leeway measures
the number of notches by which Moody's might lower the CB anchor before
the rating agency downgrades the covered bonds because of TPI framework
constraints.
Based on the current TPI levels, the TPI Leeway for these programmes
is zero notches.
A multiple-notch downgrade of the covered bonds might occur in
certain circumstances, such as (1) a country ceiling or sovereign
downgrade capping a covered bond rating or negatively affecting the CB
Anchor and the TPI; (2) a multiple-notch downgrade of the
CB Anchor; or (3) a material reduction of the value of the cover
pool.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Anne-Sophie Spirito
Vice President - Senior Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Jose de Leon
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
