Covered bonds issued by OTP Mortgage Bank were downgraded by Moody’s yesterday (Tuesday) from Baa1 to Baa3, following a downgrade of the issuer amid rating actions on several Hungarian banks, although FHB Mortgage Bank issuance was unaffected.

OTP’s and FHB’s covered bonds remain on review for downgrade. The Timely Payment Indicator (TPI) of the programmes was maintained at “very improbable”.

Moody’s uses the senior unsecured rating of OTP Bank NyRt, the parent bank of OTP Mortgage Bank, as the issuer rating for its covered bond analysis as OTP BankNyRt “provides a full, irrevocable and unconditional guarantee of OTP Mortgage Bank’s obligations”. OTP Bank NyRt’s rating was downgrade from Baa3 to Ba1 on Friday.

FHB’s senior unsecured rating was downgraded from Ba1 to Ba2, but the action had no effect on the covered bonds.

“The TPI leeway for these programmes is limited, and thus any further downgrade of the issuer ratings may lead to a downgrade of the covered bonds,” said Moody’s.

OTP Bank NyRt and FHB were downgraded following a downgrade of Hungary from Baa3 to Ba1, on negative outlook.