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Fitch Revises Outlook on CREDEM's and BPS's OBG to Stable; Affirms at 'A+'
July 6, 2015 / 3:50 PM / 2 years ago

Fitch Revises Outlook on CREDEM's and BPS's OBG to Stable; Affirms at 'A+'

(The following statement was released by the rating agency) MILAN/LONDON, July 06 (Fitch) Fitch Ratings has revised the Outlook on Credito Emiliano S.p.A.'s (CREDEM, BBB+/Stable/F2, Viability Rating (VR): bbb+) EUR2.10bn mortgage covered bonds (Obbligazioni Bancarie Garantite, OBG), guaranteed by CREDEM CB S.r.l. (CREDEM CB), and Banca Popolare di Sondrio - Societa Cooperativa per Azioni's (BPS, BBB/Stable/F3, VR: bbb) EUR500m OBG, guaranteed by POPSO Covered Bond S.r.l. (BPS CB), to Stable from Negative. Both programmes have been affirmed at 'A+'. The rating action follows the Outlook revision on CREDEM's and BPS's Issuer Default Rating (IDR) to Stable from Negative (see "Fitch Takes Rating Action on 4 Italian Medium-Sized Banks" dated 2 July 2015 available at www.fitchratings.com). KEY RATING DRIVERS - CREDEM CB The 'A+' rating is based on CREDEM's IDR of 'BBB+', an unchanged IDR uplift of 0, an unchanged Discontinuity Cap (D-Cap) of 2 and the 69.6% asset percentage (AP) that Fitch takes into account in its analysis, which provides more protection than the unchanged 80.5% 'A+' breakeven AP. The Outlook revision to Stable from Negative for the OBG rating reflects that on the issuer's IDR. The 69.6% AP that Fitch relies upon provides at least 91% recoveries on the covered bonds assumed to be in default in a 'A+' scenario and allows a two-notch recovery uplift from the 'A-' tested rating on a probability of default (PD) basis. The counterparty replacement provisions in the programme documentation are in line with a 'A' rating category and constrain the rating of the covered bonds at 'A+'. Fitch considers in its analysis the highest level of AP recorded by CREDEM CB in the last 12 months (69.6% as of end-April 2015), in line with the agency's criteria for issuers with a Short-term IDR of at least 'F2'. KEY RATING DRIVERS - BPS CB The 'A+' rating is based on BPS's IDR of 'BBB', an unchanged IDR uplift of 0, an unchanged D-Cap of 2 and the 78.74% AP that Fitch takes into account in its analysis, which provides more protection than the unchanged 79.0% 'A+' breakeven AP. The Outlook revision to Stable from Negative for the OBG rating reflects that on the issuer's IDR. The 78.74% publicly undertaken AP, which Fitch relies upon, is adequate to achieve a two-notch uplift from the 'A-' tested rating on a PD basis by providing recoveries of at least 91% on the covered bonds assumed to be in default in a 'A+' scenario. Fitch continues to rely on the 78.74% publicly undertaken AP, in line with the agency's criteria for issuers with a Short-term IDR below 'F2'. RATING SENSITIVITIES The 'A+' rating of covered bonds programme issued by Credito Emiliano S.p.A. (CREDEM) and guaranteed by CREDEM CB S.r.l., would be vulnerable to downgrade if any of the following occurs: (i) CREDEM's Issuer Default Rating (IDR) is downgraded by two or more notches to 'BBB-' or below; (ii) the number of notches represented by the IDR uplift and the Discontinuity Cap (D-Cap) is reduced to zero; (iii) the asset percentage (AP) that Fitch considers in its analysis increases above Fitch 'A+' breakeven level of 80.5%. If the AP that Fitch considers in its analysis increases to the contractual limit of 93% the rating of covered bonds issued by CREDEM would be downgraded to 'A-'; this level of AP would not be adequate to allow for timely payment on the OBG at a rating level higher than CREDEM's IDR as adjusted by the IDR uplift and would limit the covered bond rating uplift just to one notch. The 'A+' rating of covered bonds programme issued by Banca Popolare di Sondrio - Societa Cooperativa per Azioni (BPS) would be vulnerable to downgrade if any of the following occurs: (i) BPS's IDR is downgraded by one or more notches to 'BBB-' or below; (ii) the number of notches represented by the IDR uplift and the D-Cap is reduced to one or below; (iii) the AP that Fitch considers in its analysis increases above Fitch 'A+' breakeven level of 79.0%. The Fitch breakeven AP for the covered bond rating will be affected, amongst others, by the profile of the cover assets relative to outstanding covered bonds, which can change over time, even in the absence of new issuance. Therefore the breakeven AP to maintain the covered bond rating cannot be assumed to remain stable over time. Contact: Primary Analysts Diana Ilaria Leone, CFA (CREDEM CB) Director +39 02 879 087 219 Fitch Italia S.P.A. Via Morigi 6 - Ingresso via Privata Maria Teresa 8 20123 Milan Roberto Del Ragno (BPS CB) Associate Director +39 02 879 087 206 Fitch Italia S.P.A. Via Morigi 6 - Ingresso via Privata Maria Teresa 8 20123 Milan Secondary Analysts Sara De Novellis (CREDEM CB) Analyst +39 02 879 087 295 Diana Ilaria Leone, CFA (BPS CB) Director +39 02 879 087 219 Committee Chairperson Federica Fabrizi Senior Director +39 02 879 087 232 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: christian.giesen@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria EMEA Residential Mortgage Loss Criteria (pub. 31 Mar 2015) here Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014) here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014) here Covered Bonds Rating Criteria (pub. 08 Aug 2014) here Covered Bonds Rating Criteria – Mortgage Liquidity and Refinancing Stress Addendum (pub. 06 Jul 2015) here Criteria Addendum: Italy - Residential Mortgage Assumptions (pub. 09 Jun 2015) here Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014) here Criteria for Sovereign Risk in Developed Markets for Structured Finance and Covered Bonds (pub. 20 Feb 2015) here EMEA RMBS Master Rating Criteria (pub. 31 Mar 2015) here Fitch's Mortgage Covered Bond Refinancing Stresses - Excel File (pub. 03 Jul 2015) here Additional Disclosures <a href="https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame. cfm?pr_id=987465">Dodd-Frank Rating Information Disclosure Form Solicitation Status here <a href="https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context =2&detail=31">Endorsement Policy ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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