Standard & Poor’s has cut cédulas hipotecarias issued by Banca Cívica, Banco Popular Español and Bankia after downgrades of the Spanish issuers, and left Bankia’s on CreditWatch negative partly because it is awaiting further information on the covered bonds.

Bankia cédulas hipotecarias were cut from AA to AA- after the issuer was downgraded from BBB- to BB+ on 25 May, when S&P took rating actions on several Spanish financial institutions. The rating agency assigns Bankia’s mortgage covered bonds to Category 1 and a “low” ALMM classification, meaning that they can be rated up to seven notches higher than the issuer. As the previous covered bond rating incorporated this seven notch uplift, the downgrade of the issuer led directly led to the cédulas downgrade, with the maximum achievable rating falling.

S&P cited two reasons for the covered bonds being on CreditWatch negative. Firstly, to reflect the bank being on CreditWatch negative, with a negative rating action on the issuer resulting in a similar action on the covered bonds, all other things being equal.

The rating agency said that the CreditWatch negative is also the result of client information on the covered bonds as of December 2011 not yet being available for its credit and cashflow analysis.

Banca Cívica cédulas hipotecarias were cut from AA- to A+ after the issuer was downgraded from BB+ to BB. The rating agency assigns Banca Cívica’s mortgage covered bonds to Category 1 and a “low” ALMM classification, meaning that they can be rated up to seven notches higher than the issuer. As the previous covered bond rating incorporated this seven notch uplift, the downgrade of the issuer led directly led to the cédulas downgrade, with the maximum achievable rating falling.

The covered bonds are on CreditWatch positive, reflecting the bank being on CreditWatch positive, with a positive rating action on the issuer resulting in a similar action on the covered bonds, all other things being equal, said S&P.

It noted that any positive effect on the covered bond ratings could be constrained by a cap of six notches of uplift above the sovereign’s BBB+ rating that applies under its EMU criteria. S&P also said that all of the covered bond ratings dealt with in its press release were below the maximum achievable under this aspect of its methodology.

Banco Popular Español cédulas hipotecarias were cut from AA- to A+ after the issuer was downgraded from BBB- to BB+. The rating agency assigns Banco Popular Español mortgage covered bonds to Category 1 and a “moderate” ALMM classification, meaning that they can be rated up to six notches higher than the issuer. As the previous covered bond rating incorporated this six notch uplift, the downgrade of the issuer led directly led to the cédulas downgrade, with the maximum achievable rating falling.

Like the issuer, the covered bonds have a negative outlook.

Kutxabank cédulas hipotecarias were affirmed at AA after S&P affirmed the issuer’s BBB- rating, on negative outlook.