Standard & Poor’s will, all else being equal, upgrade Banca Cívica cédulas hipotecarias after a legal merger between Banca Cívica and CaixaBank is finalised if the rating agency lifts the former’s rating.

S&P placed the covered bonds, rated AA, on CreditWatch positive yesterday (Tuesday), after having on Friday assigned this status to Banca Cívica, which it rates BBB-. The rating actions follow an announcement on 26 March that Banca Cívica had reached a preliminary merger agreement with fellow Spanish bank CaixaBank.

S&P rates Banca Cívica’s mortgage backed covered bonds seven notches above the issuer, the maximum potential uplift given a combination of “low” asset-liability mismatch (ALMM) risk and a Category 1 programme classification under S&P’s covered bond rating methodology.

All else being equal, any positive rating action on the issuer would automatically lead to a corresponding rating change on these covered bonds, said S&P.

“We aim to resolve our CreditWatch positive placement of the ratings on Banca Cívica’s mortgage covered bonds after the final legal merger between the two entities is finalised,” it said. “We will also aim to assess information relating to the credit quality of the combined mortgage books of Banca Cívica and CaixaBank”.