DBRS Confirms Ratings on Banco Commercial Português Covered Bond Programme

DBRS Ratings Limited (DBRS) has today confirmed the ‘A’ (low) rating of EUR 8.85bn of obrigações hipotecárias (the Portuguese legislative covered bonds) outstanding under Banco Commercial Português (BCP) Covered Bond Programme.

The confirmation follows the completion of a full review of the programme.

The rating action reflects the following analytical considerations:
• The senior unsecured debt rating of the issuer of BBB (low) with Negative Trend confirmed on 28 June 2013.
• DBRS Legal and Structuring Framework (LSF) assessment of “Adequate”.
• DBRS Cover Pool Credit Assessment of BBB (low) and Banco Commercial Português minimum OC commitment of 34%.

The transaction was modeled in DBRS European Covered Bond Cash Flow Model. The main assumptions focused on the timing of defaults and recoveries of the assets, interest rate stresses and market spread values to calculate liquidation values on the cover pool.

As at 30 September 2013, the cover pool was composed of 230,967 residential mortgage loans for a total outstanding balance of EUR 11,870,566,293 resulting in an over-collateralisation of 34.13%. The WA seasoning of the loans in the cover pool is 86 months and the WA current unindexed loan-to-value is 56.77%. 93.59% of the loans in the cover pool are floating rate and 6.41% are fixed rate. The pool is geographically diversified across the country and largely originated for the purpose of acquiring first or second homes (95.59% by outstanding).

The WA life of the loans in the cover pool is roughly 16 years, while the WA life of the covered bonds is around three years when accounting for the expected maturity date. This generates an asset-liability mismatch of approximately 13 years.

Such mismatch is mitigated in part by the OC and in part by a 12-month extendable maturity feature by which, should the issuer default on its payment on the covered bonds at the respective expected maturity date, the covered bonds maturities are automatically extended on a monthly basis up to 12 months.

All the loans in the cover pool and all covered bonds are denominated in Euros.

On 13 March 2023, DBRS Morningstar amended the above press release to correct the Initial Rating Date.

Notes:
All figures are in Euro unless otherwise noted.

The principal methodology applicable is: “Rating European Covered Bonds”. This can be found on www.dbrs.com.

Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include historical default performance data spanning from 1998 to 2013, investor reports and loan by loan level information on the cover pool provided by BCP that allowed DBRS to further assess the portfolio. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on May 20, 2013 when DBRS confirmed the rating of ‘A’ (low) on the covered bond upon the amendments to Series 5.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

All else equal, a downgrade of the issuer rating by one notch would lead to a downgrade of the covered bonds by two notches.

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Keith Gorman
Initial Rating Date: 28 February 2012
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 20 May 2013

Lead Analyst: Valentina Cicerone
Rating Committee Chair: Quincy Tang

The lead and back-up responsibilities for this transaction have been transferred to Valentina Cicerone and Vito Natale respectively.

DBRS Ratings Limited
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United Kingdom

Registered in England and Wales: No. 7139960

The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

• Rating European Covered Bonds
• Global Methodology for Rating Banks & Banking Organisations
• Legal Criteria for European Structured Finance Transactions
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model Methodology for European Securitisations