Portugal

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.

Bankinter today (Thursday) launched a Eu1bn three year deal that is the seventh cédulas transaction in as many days, including taps, while a downgrade of Portugal’s rating by Fitch yesterday (Wednesday) has been an extra factor for Banco Santander Totta to consider as it approaches the market.

Banco Bilbao Vizcaya Argentaria is today (Wednesday) in the covered bond market with the week’s ninth deal, after Deutsche Postbank earlier today priced a Eu1bn 10 year Pfandbrief that took supply of Eu500m-plus issues to Eu5.2bn over the first three days of the week. Meanwhile, Portugal’s Banco Santander Totta has announced plans to tap the market.

Caixa Geral de Depósitos is set to take Abbey’s place as the record ninth benchmark covered bond issuer this week, after the Portuguese but not the UK bank decided to brave the week’s widening market.