Frankfurt am Main, April 01, 2022 -- Moody's Investors Service ("Moody's") has taken the following rating actions:
- Covered bond issued by Alpha Bank S.A. under its Direct Issuance Global Covered Bond Programme I: Upgraded to A3 from Baa1;
- Covered bond issued by Alpha Bank S.A. under its Direct Issuance Global Covered Bond Programme II: Upgraded to A3 from Baa1.
- Covered bond issued by Eurobank S.A. under its Mortgage Covered Bonds 2 Programme: Upgraded to A3 from Baa2.
Moody's has also lowered its refinancing margin assumptions used in Greek covered bond programmes.
RATINGS RATIONALE
This rating action follows Moody's upgrade of Alpha Bank S.A.'s Counterparty Risk (CR) Assessment to Ba2(cr) from Ba3(cr) and upgrade of Eurobank S.A.'s Counterparty Risk (CR) Assessment to Ba2(cr) from Ba3(cr) on 30 March 2022.
As a result, the covered bond (CB) anchor for both Alpha Bank S.A's and Eurobank S.A.'s covered bonds is now one notch higher.
For Alpha Bank S.A. Direct Issuance Global Covered Bond Programme I, the over-collateralisation (OC) in the programme is consistent with a covered bond rating of A3, which is equal to the local currency country ceiling, the highest rating achievable in Greece.
For Alpha Bank S.A. Direct Issuance Global Covered Bond Programme II the over-collateralisation (OC) in the programme is consistent with a covered bond rating of A3, which is equal to the local currency country ceiling, the highest rating achievable in Greece.
For Eurobank S.A. - Mortgage Covered Bonds 2 the over-collateralisation (OC) in the programme is consistent with a covered bond rating of A3, which is equal to the local currency country ceiling, the highest rating achievable in Greece.
For further details on the rating actions on Greek banks, please refer to Moody's press release: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_463573.
The changes in modelling assumptions are supported by a combination of factors that have lowered refinancing risk for the covered bond programmes. These factors include (i) banks' reliance on covered bond funding, that has experienced a sustained increase over time; and (ii) Greece's implementation of the EU directive on covered bonds, which will reinforce the strengths of the Greek covered bond legal framework.
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 (such cessation, a CB anchor event); and (2) the estimated losses that will accrue to covered bondholders should a CB anchor event occur. We express the probability of a CB anchor event as a point on our alpha-numeric rating scale (i.e. the CB anchor), which is typically one notch higher than the issuer's CR assessment.
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.
The CB anchor for Alpha Bank S.A. Direct Issuance Global Covered Bond Programme I and II is Ba1, being the CR assessments of Alpha Bank S.A. plus one notch.
The CB anchor for Eurobank S.A. - Mortgage Covered Bonds 2 is Ba1, being the CR assessments of Eurobank S.A. plus one notch.
The cover pool losses of Alpha Bank S.A. Direct Issuance Global Covered Bond Programme I are 32.7%, with market risk of 20.2% and collateral risk of 12.5%. The collateral score for this programme is currently 18.7%. The over-collateralisation in this cover pool is 46.4 %, of which the issuer provides 27% on a "committed" basis. Under Moody's COBOL model, the minimum OC consistent with the A3 rating is 13%. These numbers show that Moody's is not relying on "uncommitted" OC in its expected loss analysis.
The cover pool losses of Alpha Bank S.A. Direct Issuance Global Covered Bond Programme II are 22.3%, with market risk of 9.8% and collateral risk of 12.5%. The collateral score for this programme is currently 18.7%. The over-collateralisation in this cover pool is 14.7%, of which the issuer provides 5.3% on a "committed" basis. Under Moody's COBOL model, the minimum OC consistent with the A3 rating is 3%. These numbers show that Moody's is not relying on "uncommitted" OC in its expected loss analysis.
The cover pool losses of Eurobank S.A. - Mortgage Covered Bonds 2 are 32.7%, with market risk of 15.7% and collateral risk of 17.0%. The collateral score for this programme is currently 23.7%. 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 A3 rating is 15%. 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.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI), which is our assessment of the likelihood of timely payment of interest and principal to covered bondholders following a CB anchor event. TPIs are assessed as Very High, High, Probable-High, Probable, Improbable or Very Improbable. The TPI framework limits the covered bond rating to a certain number of notches above the CB anchor.
For Alpha Bank S.A. Direct Issuance Global Covered Bond Programme I, Moody's has assigned a TPI of Improbable.
For Alpha Bank S.A. Direct Issuance Global Covered Bond Programme II, Moody's has assigned a TPI of Probable.
For Eurobank S.A. - Mortgage Covered Bonds 2, Moody's has assigned a TPI of Improbable.
RATING METHODOLOGY
The principal methodology used in these ratings was 'Moody's Approach to Rating Covered Bonds' published in December 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1307630. Alternatively, 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 of "Improbable", the TPI Leeway for Alpha Bank S.A. Direct Issuance Global Covered Bond Programme I is zero notches. This implies that Moody's might downgrade the covered bonds because of a TPI cap, if it lowers the CB anchor one notch all other variables being equal.
Based on the current TPI of "Probable", the TPI Leeway for Alpha Bank S.A. Direct Issuance Global Covered Bond Programme II is one notch. This implies that Moody's might downgrade the covered bonds because of a TPI cap, if it lowers the CB anchor two notches all other variables being equal.
Based on the current TPI of "Improbable", the TPI Leeway for Eurobank S.A. - Mortgage Covered Bonds 2 is zero notches. This implies that Moody's might downgrade the covered bonds because of a TPI cap, if it lowers the CB anchor one notch all other variables being equal.
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 in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
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Stanislav Nastassine
Vice President - Senior Analyst
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main, 60322
Germany
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 Deutschland GmbH
An der Welle 5
Frankfurt am Main, 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
