Moody’s upgraded benchmark mortgage covered bonds issued by Banco Popolare and Banca Popolare di Milano from A2 to A1 yesterday (Wednesday) after having upgraded the two Italian issuers upon confirmation that they will merge.

The two banks’ Counterparty Risk (CR) assessments were each raised from Ba2 to Ba1 on 20 October and Moody’s cited this as the reason for its positive actions on the covered bond programmes yesterday.

Banco Popolare and Banca Popolare di Milano (BPM) each have two covered bond programmes and both of BPM’s as well as that which Banco Popolare issues benchmarks off were upgraded from A2 to A1 – the level at which the ratings are constrained by Moody’s Timely Payment Indicator (TPI) framework based on TPIs of “probable”.

A second Banco Popolare programme was upgraded from A3 to A2. Moody’s said that while it has a relatively high level of overcollateralisation (OC) at present, it does not expect the level and form of OC to continue to be consistent with an A1 rating.