Standard & Poor’s cut Banco Popular Español and Bankia cédulas hipotecarias by one notch yesterday (Thursday) and put four other Spanish mortgage covered bond programmes on CreditWatch negative after downgrading several Spanish banks on Monday.

Banco Popular Español’s covered bonds were cut from A+ to A, and Bankia’s from A- to BBB+. The mortgage covered bonds of Bankinter, CaixaBank, Cataluyna Banc and Kutxabank were placed on CreditWatch with negative implications.

The cuts to Banco Popular’s and Bankia’s covered bonds came after the issuers were downgraded from BB+ to BB. Under S&P’s criteria, Banco Popular’s mortgage covered bonds can achieve a maximum five notch uplift over the issuer rating and Bankia’s a four notch uplift, so the downgrades of the issuer ratings led directly to the downgrade of the covered bonds.

CaixaBank was cut from BBB to BBB-, but its cédulas hipotecarias were not rated at the maximum seven notch uplift above the issuer’s rating because they were capped at a AA- ceiling for Spanish covered bonds, so they were not downgraded. However, CaixaBank was left on CreditWatch negative and S&P said that any further downgrade of the bank would directly lead to a cut in the rating of the covered bonds.

Kutxabank was not downgraded but was placed on CreditWatch negative. Its covered bonds can achieve a seven notch uplift over the issuer’s rating under S&P’s ALMM criteria, but are capped six notches higher because of the Spanish ceiling. However, S&P said that they are on CreditWatch because a downgrade of Kutxabank by more than one notch would directly affect the covered bonds’ rating.

Bankinter’s covered bonds were put on CreditWatch negative because the issuer was placed on CreditWatch negative and the cédulas hipotecarias already incorporated the maximum five notch uplift achievable under S&P’s criteria.

Catalunya Banc’s covered bonds were placed on CreditWatch negative to reflect a change in S&P’s view of the issuer’s creditworthiness, which could affect the rating of the cédulas hipotecarias, it said.