Actions follow rating action on the Greek sovereign rating
Madrid, November 10, 2020 -- Moody's Investors Service ("Moody's) has today upgraded the
following ratings of the mortgage covered bonds across two Greek covered
bond programmes:
- Upgraded to Baa2 from Baa3, the mortgage covered bonds
issued by Eurobank S.A. (counterparty risk (CR) assessment
B1(cr)), under its Mortgage Covered Bonds 2 programme
- Upgraded to A3 from Baa1, the mortgage covered bonds issued
by National Bank of Greece S.A. (CR assessment B1(cr)),
under its Global Mortgage Covered Bonds programme
RATINGS RATIONALE
The upgrades on the covered bond ratings referenced above follow the Greek
sovereign rating upgrade to Ba3 from B1, and the increase of Greece's
long-term country ceilings for foreign currency and local currency
bonds to A3 from Baa1.
Furthermore, Moody's has raised its timely payment indicator (TPI)
to "Improbable" from "Very Improbable" for Eurobank S.A.
- Mortgage Covered Bonds 2. The raising of the TPI is underpinned
by the combination of different factors that have lowered the refinancing
risk of Greek covered bonds, including (1) the improvement of the
Greek economy as reflected in the upgrade of the Greek's sovereign ratings,
and (2) stronger market liquidity, reflecting more favourable operating
conditions for Greek banks.
The ratings of Eurobank S.A. - Mortgage Covered Bonds
2 are now constrained by the timely payment indicator (TPI) of Improbable.
The ratings of National Bank of Greece S.A. - Global
Mortgage Covered Bonds are now constrained by the long-term country
ceilings for local currency bonds of A3 and the timely payment indicator
(TPI) of Probable-High.
Please refer to: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_435205.
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 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 these programmes is the CR assessment plus 1 notch.
The cover pool losses of Eurobank S.A. - Mortgage
Covered Bonds 2 are 33.8%, with market risk of 19.6%
and collateral risk of 14.2%. The collateral score
for this programme is currently 21.2%. The over-collateralisation
in this cover pool is 37.5%, of which the issuer provides
7.5% on a "committed" basis. Under Moody's
COBOL model, the minimum OC consistent with the Baa2 rating is 14.5%.
These numbers show that Moody's is relying on "uncommitted"
OC in its expected loss analysis.
The cover pool losses of National Bank of Greece S.A. -
Global Mortgage Covered Bonds are 23.6%, with market
risk of 11.1% and collateral risk of 12.5%.
The collateral score for this programme is currently 18.7%.
The over-collateralisation in this cover pool is 49.2%,
of which the issuer provides 23.5% on a "committed"
basis. Under Moody's COBOL model, the minimum OC consistent
with the A3 rating is 13.0%. 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 is our assessment of the likelihood of timely payment
of interest and principal 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.
RATING METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Covered Bonds" published in October 2020 and
available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1234823.
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.
The TPI assigned to Eurobank S.A. - Mortgage Covered
Bonds 2 is Improbable. The TPI Leeway for this programme is zero,
and thus any reduction of the CB anchor may lead to a downgrade of the
covered bonds.
The TPI assigned to National Bank of Greece S.A. -
Global Mortgage Covered Bonds is Probable-High. The TPI
Leeway for this programme is zero, and thus any reduction of the
CB anchor may lead to a downgrade of the covered bonds.
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 https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
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.
Miguel Lopez Patron
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
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 Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
