PIRAEUS FINANCIAL HOLDINGS S.A.
Fitch Ratings has affirmed
The affirmation follows a periodic review of the programme.
KEY RATING DRIVERS
Piraeus's covered bonds are rated 'BBB', four notches above the bank's Long-Term IDR of 'BB-' out of a maximum achievable uplift of 12 notches. The latter is based on an unchanged resolution uplift of two notches, an unchanged payment continuity uplift (PCU) of eight notches and a recovery uplift of three notches (two notches if the timely payment rating level is in the investment-grade category).
The 'BBB' break-even nominal OC is 24%. This level supports a two-notch recovery uplift above the resolution reference point of 'BB+' (two notches above Piraeus's 'BB-' IDR), and is equal to the credit loss assumed for the cover pool in a 'BBB' rating case.
OC Constrains Rating: Piraeus's covered bonds' rating is constrained by the over-collateralisation (OC) commitment from the bank, which Fitch relies on in its analysis. This includes Piraeus's 25% OC used in the programme's investor report, plus an additional 2% OC reflecting the deductions made in the programme's nominal value test for loans with a current-loan-to-value (CLTV) above 80%. The relied upon OC supports a 'BBB' rating, based on resolution protection and recovery given default, and does not sustain stresses at higher rating cases. The Stable Outlook on Piraeus's covered bonds' rating reflects that the rating is constrained by OC.
'BBB' Break-even OC: The break-even OC for Piraeus' covered bonds corresponds to the credit loss assessment of 24.0% as the 'BBB' rating is based on a recovery uplift above the 'BB+' resolution reference point.
The credit loss has been revised to 24% from 26.8% at the 'BBB' rating, reflecting the recalibration of rating stresses for Greek residential mortgages as part of Fitch's European RMBS Rating Criteria up to the 'A+' structured finance and covered bonds rating cap for
Unchanged Cover Pool Credit Quality: As of
Resolution Uplift: The unchanged resolution uplift of two notches for the programme reflects Greek covered bonds' exemption from bail-in, that the bank's Long-Term IDR is driven by its Viability Rating, and Fitch's view of the low risk of under-collateralisation at the point of resolution.
PCU: The PCU remains eight notches for Piraeus's conditional pass-through programme. Fitch's payment continuity assessment also considers available protection for interest payments of at least three months.
Recovery Uplift: The programme is eligible for three notches of recovery uplift as the timely payment rating level is non-investment-grade and no material downside risk to recoveries have been identified. However only two notches out of three are used in the current rating, given that the relied-upon OC only covers credit losses at the 'BBB' rating case, but not the credit loss at higher rating levels.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
Piraeus's covered bonds could be upgraded up to
Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
Piraeus's covered bonds' rating would not be sensitive to a multi-notch downgrade of the bank, considering the unused notches of PCU uplift
The programme would be downgraded if the OC that Fitch relies upon in its analysis decreases below Fitch's 'BBB' 24% nominal break-even OC.
Fitch's break-even OC for the covered bonds' rating will be affected, among other factors, 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 break-even OC to maintain the covered bonds' rating cannot be assumed to remain stable over time.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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