Moody’s cut three Portuguese covered bond programmes on Saturday, two of them to Baa3, after downgrading the respective issuers on Friday. Seven other Portuguese programmes were confirmed at Baa3.

Mortgage and public sector covered bonds of Banco BPI were cut from A3 to Baa3. Mortgage covered bonds of Banco Santander Totta (BST) were lowered from A1 to A2.

Confirmed at Baa3 were public sector covered bonds of Caixa Geral de Depósitos and mortgage covered bonds of CGD, Banif (Banco Internacional do Funchal), Caixa Económica Montepio Geral, Banco Comercial Português, Banco de Investimento Imobiliário, and Banco Espírito Santo.

The rating actions conclude reviews initiated on 15 July as a result of a downgrade of Portugal from Baa1 to Ba2, negative outlook.

With the exception of those of BST and Banif, the covered bond ratings are at the highest possible achievable given the combinations of the issuers’ senior unsecured ratings and the Timely Payment Indicators (TPIs) assigned to the programmes (“very improbable”).

The rating of BST’s mortgage programme is capped at A1 given a combination of the “very improbable” TPI of the programme and the issuer’s Baa2 rating, but, said Moody’s, overcollateralisation is insufficient to achieve a higher rating.

Banif could achieve an A3 rating for its mortgage covered bonds given the “probable-high” TPI of its programme and the issuer’s Ba3 rating, but it, too, has insufficient overcollateralisation to achieve a higher rating, said Moody’s.