Moody’s put the Aa1 rating of mortgage covered bonds issued by Santander Consumer Finance on review for upgrade yesterday (Thursday), after the rating agency raised the issuer from Baa1 to A3 on Wednesday.

The rating agency said that the upgrade of Santander Consumer Finance (SCF) and stabilisation of its outlook was driven by an improvement in the company’s financial fundamentals. Among factors cited by Moody’s as contributing to this were capital injections from SCF’s parent, Banco Santander.

Moody’s said that the review of the mortgage covered bonds’ rating will focus on the sustainability of SCF’s mortgage cover pool in light of its limited mortgage lending growth in recent years.

“SCF is planning to acquire a pool of mortgage participations (‘participaciones hipotecarias’) from its parent in order to maintain certain overcollateralisation levels,” said the rating agency. “During the review Moody’s will assess mortgage participations as a new asset class to be included in the cover pool.”

Moody’s cut the covered bonds’ rating from Aaa to Aa1 on 25 March.