Fitch upgraded covered bonds issued off National Bank of Greece’s Programme II to investment grade, BBB-, yesterday (Thursday) and lifted its rating of Piraeus covered bonds to BB, while S&P assigned a BBB- rating to issuance off Eurobank Ergasias’s Programme III.

The rating agency upgraded Greece from B to BB- on 10 August, with the country ceiling rising to BBB-, and on 22 August Fitch placed four Greek covered bond programmes on Rating Watch Positive.

Reviews of the National Bank of Greece (NBG) and Piraeus programmes were concluded following the publication of asset assumptions for Greek residential mortgage loans and refinancing spread levels up to the BBB- country ceiling, Fitch said.

The NBG II programme was upgraded from BB- to BBB- and Piraeus’s covered bonds from BB- to BB. Another NBG programme, NBG I, was affirmed at BB-.

NBG I’s rating is constrained by a 25% overcollateralisation (OC) level Fitch relies upon offering insufficient protection to withstand stresses for rating scenarios higher than a B rating floor on a probability of default (PD) basis. The 25% OC level is sufficient for the new ratings of NBG II and Piraeus in this respect.

Fitch noted that NBG II and Piraeus benefit from a full three notches of recovery uplift, with the relied-upon OC offsetting credit losses at the respective covered bonds ratings. However, NBG I has only been assigned a two-notch recovery uplift due to a larger credit loss, also taking into account an asset transfer that occurred in August, which increased the proportion of restructured loans from 16.3% to 24.8%, according to Fitch.

NBG’s issuer default rating is CCC+ and Piraeus’s CCC at Fitch.

S&P yesterday assigned a BBB- rating to a conditional pass-through covered bond programme of Eurobank Ergasias (Programme III).

The covered bonds’ rating is delinked from that of the issuer’s jurisdiction-supported rating level thanks to their conditional pass-through structure, and under S&P’s methodology can be up to four notches above the sovereign rating (B+).

An analyst noted that the BBB- S&P rating should make the Eurobank CPT covered bonds ECB repo-eligible, with a 50% risk weighting and potential LCR Level 2B eligibility. He said NBG II covered bonds should now be eligible for certain indices that require the middle rating to be investment grade (they are also rated Ba2 by Moody’s and BBB- by S&P).

When S&P assigned NBG II the BBB- rating in July, it was the first investment grade rating for a Greek covered bond since 2011.