A range of Portuguese and Italian covered bonds were placed on Rating Watch Positive by Fitch yesterday (Monday) and the public sector covered bonds of BNP Paribas were upgraded to AA+, as the agency continued to implement its updated rating methodology.

On 26 October Fitch made changes to its covered bond rating criteria that, among other revisions, replaced Discontinuity Caps (D-Caps) with Payment Continuity Uplifts (PCUs), and reflected a broader view on eligibility for Issuer Default Rating (IDR) uplift. The rating agency flagged that a wave of upgrades could follow, mainly driven by higher IDR uplifts or PCUs.

Yesterday afternoon Fitch placed on Rating Watch Positive (RWP) the obrigações hipotecárias programmes of Banco Santander Totta and Caixa Económica Montepio Geral (both rated A- ), Caixa Geral de Depósitos (BBB), and Banco Comercial Português (BBB-).

The RWPs reflect a new maximum achievable rating of A for the OH of Totta, A+ for Montepio, and BBB+ for CGD and BCP.

Later yesterday, Fitch took rating actions on eight Italian obbligazioni bancarie garantite (OBG) programmes. These followed the implementation of the revised covered bond criteria, but also incorporated a revision of the outlook on the sovereign from stable to negative on 21 October and the revision of the IDRs of Credem and Mediobanca from stable to negative on 28 October.

The rating actions are:

• Banca Carige BB+ OBG rating placed on RWP, with a maximum achievable rating of BBB+
• Banca Monte dei Paschi di Siena BBB OBG rating maintained on Rating Watch Evolving (RWE)
• Banca Popolare di Sondrio A+ OBG rating placed on RWP, with a maximum achievable rating of AA+
• Credito Emiliano A+ OBG rating maintained on RWP, with a maximum achievable rating of AA
• Mediobanca A+ OBG rating maintained on RWP, with a maximum achievable rating of AA
• Unione di Banche Italiane BBB+ OBG rating placed on RWP, with a maximum achievable rating of A
• UniCredit AA soft bullet OBG rating placed on RWP, with a maximum achievable rating of AA+.

UniCredit’s CPT OBGs were affirmed at AA+ but the outlook revised from Stable to Negative because of the revision of Italy’s outlook, with the programme capped at Italy’s country ceiling.

The obligations foncières of BNP Paribas Public Sector SCF were upgraded from AA to AA+, on the back of an increase in the IDR uplift for the programme from one notch to two notches, which resulted in a new AA floor rating.