London, 29 May 2019 -- Moody's Investors Service ("Moody's") has taken the following rating actions
on covered bonds issued by Banco BPM S.p.A. (the
issuer; counterparty risk (CR) assessment Baa3(cr)):
- Banco BPM (BPM) S.p.A. - Mortgage
Covered Bonds 1: upgraded to Aa3 from A1
- Banco BPM (Banco Popolare) S.p.A. -
Mortgage Covered Bonds 1: upgraded to Aa3 from A1
- Banco BPM (BPM) S.p.A. - Mortgage
Covered Bonds 2: upgraded to Aa3 from A1
RATINGS RATIONALE
The rating actions were prompted by the upgrade of Banco BPM S.p.A's
CR assessment to Baa3(cr) from Ba1(cr). For more information see
the press release http://www.moodys.com/viewresearchdoc.aspx?docid=PR_401590,
published on 28 May 2019.
The Timely Payment Indicator (TPI) assigned to these transactions is Probable.
Moody's TPI framework does not constrain the rating.
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 covered 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 these programmes is CR assessment plus 1 notch.
The CR assessment reflects an issuer's ability to avoid defaulting
on certain senior bank operating obligations and contractual commitments,
including covered bonds. Moody's may use a CB anchor of CR
assessment plus one notch in the European Union or otherwise where an
operational resolution regime is particularly likely to ensure continuity
of covered bond payments.
The cover pool losses are an estimate of the losses Moody's currently
models following a CB anchor event. Moody's splits cover
pool losses between market risk and collateral risk. 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 is derived from the collateral score, which measures
losses resulting directly from the cover pool assets' credit quality.
Banco BPM (BPM) S.p.A. - Mortgage Covered
Bonds 1
The cover pool losses of this programme are 19.5%,
with market risk of 13.7% and collateral risk of 5.8
%. The collateral score for this programme is currently
8.6%. The over-collateralisation in this cover
pool is 13.8%, of which the issuer provides 7.5%
on a "committed" basis. Under Moody's COBOL model,
the minimum OC consistent with the Aa3 rating is 4.5%.
These numbers show that Moody's is not relying on "uncommitted"
OC in its expected loss analysis.
Banco BPM (BPM) S.p.A. - Mortgage Covered
Bonds 2
The cover pool losses of this programme are 22.4%,
with market risk of 19.1% and collateral risk of 3.3%.
The collateral score for this programme is currently 5.0%.
The over-collateralisation in this cover pool is 46.0%,
of which the issuer provides 7.5% on a "committed"
basis. Under Moody's COBOL model, the minimum OC consistent
with the Aa3 rating is 6.0%. These numbers show that
Moody's is not relying on "uncommitted" OC in its expected
loss analysis.
Banco BPM (Banco Popolare) S.p.A. - Mortgage
Covered Bonds 1
The cover pool losses of this programme are 24.4%,
with market risk of 21.0% and collateral risk of 3.4%.
The collateral score for this programme is currently 5.0%.
The over-collateralisation in this cover pool is 28.5%,
of which the issuer provides 7.5% on a "committed"
basis. Under Moody's COBOL model, the minimum OC consistent
with the Aa3 rating is 9.5%. These numbers show that
Moody's is 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.
All numbers in this section are based on Moody's most recent modelling.
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.
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 of "Probable", the TPI Leeway
for these programmes is 0 notch. This implies that Moody's
might downgrade the covered bonds because of a TPI cap if it lowers the
CB anchor by 1 notch all other variables being equal.
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.
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 or category/class of debt,
this announcement provides certain 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 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.
Francesca Falconi
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
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 Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
