S&P cut Bankia mortgage covered bonds from AA- to A- yesterday (Thursday) on lower overcollateralisation, with the rating action based on an analysis of December 2011 loan data although the rating agency will soon receive and analyse mortgage loan book data as of June.

The downgrade is based on S&P applying credit and cashflow stresses to the December 2011 mortgage loan book and outstanding covered bond information it received from the issuer, said the rating agency.

In the coming days it will receive and analyse Bankia’s mortgage loan book data as of June 2012, it added.

S&P considers Bankia’s cédulas hipotecarias to feature “low” asset-liability mismatch risk, which together with the programme Category 1 designation would allow the covered bonds to be rated up to seven notches higher than the issuer, which S&P rates BB+.

“However, we are lowering the notching differential between Bankia’s mortgage covered bond ratings and long term rating to four notches from our maximum of seven,” said S&P, “because we believe Bankia’s overcollateralisation level is no longer commensurate with the maximum number of notches allowed under our criteria.”

The covered bond rating remains on CreditWatch negative, where it was placed in June, with this status mirroring that on Bankia and reflecting S&P’s view that any decrease in overcollateralisation could limit the number of notches of uplift to less than four notches.