Portugal

Standard & Poor’s yesterday (Thursday) downgraded mortgage covered bonds issued by Banco BPI by four notches, from AAA to A+.

Fitch downgraded five Portuguese banks, including Banco Comercial Português, Banco Espírito Santo and Banco BPI yesterday (Thursday), because it considers them to have limited funding sources and a reduced ability to raise medium term funding.

Moody’s downgraded four Portuguese covered bond programmes yesterday (Tuesday) after last week cutting the ratings of their issuers on the back of a sovereign downgrade. Two remain on review for downgrade alongside three that have not yet been lowered.

Standard & Poor’s yesterday (Wednesday) downgraded public sector-backed covered bonds issued by Portugal’s Banco BPI by five notches, from AAA to A, under its revised rating methodology. Meanwhile, Moody’s has cut the issuer ratings of eight Portuguese banks, including the country’s six covered bond issuers.

Caixa Geral de Depósitos has become the fourth issuer to cancel a covered bond ratings contract with Standard & Poor’s since the rating agency finalised a new methodology in December. S&P on Friday withdrew the ratings of the Portuguese bank’s mortgage covered bonds after affirming them at AAA and assigning a negative outlook.

Moody’s put seven Portuguese covered bond programmes on review for downgrade yesterday (Wednesday) after taking the same action on the sovereign and then 10 rated Portuguese banks.

Standard & Poor’s yesterday (Wednesday) said that a downgrade of Spain from AA+ to AA, on negative outlook, would not “automatically” trigger cuts of Spanish financial institutions’ ratings, although it downgraded five Portuguese banks on Tuesday after lowering their sovereign’s rating that day.

Fitch yesterday (Tuesday) revised the outlook on Banco Comercial Português and Banco Espírito Santo from stable to negative, but affirmed their ratings and those of Banco Santander Totta and Banco BPI. The rating agency has also affirmed mortgage covered bonds issued by Caixa Geral de Depósitos at AAA.

Banco Santander Totta negotiated an unexpected downgrade of its sovereign last week to price a Eu1bn three year obrigações hipotecárias issue yesterday (Monday), the first Portuguese benchmark covered bond in nearly three months.

Bancaja today (Monday) became the seventh Spanish issuer to tap the benchmark covered bond market in eight working days, while Portugal’s Banco Santander Totta is following through with a deal announced before Fitch last Wednesday cut its sovereign’s rating. Meanwhile, an Italian bank will soon be on the road.

In an exception to its covered bond rating criteria, Fitch yesterday (Thursday) downgraded Caixa Geral de Depósitos’s public sector covered bonds from AAA to AA+ because of its cut in the Portuguese sovereign’s rating from AA to AA- on Wednesday.

Banco Santander Totta is understood to be considering whether to proceed with launching a covered bond early next week, with market participants discussing the pros and cons of issuance not only for the Portuguese bank, but also for Spanish banks that have been rushing to market.