National Bank of Greece’s benchmark covered bond was upgraded from BBB- to BBB+ by Fitch yesterday, while Piraeus Bank issuance was lifted from BB to BB+, in light of developments including the raising of the Greek country ceiling from BBB- to BBB+.

The country ceiling was raised after Fitch on 24 January upgraded the Greek sovereign from BB- to BB and changed its outlook from stable to positive. The covered bond upgrades, which followed a periodic review of the programmes, also took into account an update to Fitch’s structured finance and covered bonds country risk rating criteria and a February recalibration of its stresses for Greek mortgages.

Fitch’s National Bank of Greece (NBG) upgrade is of the bank’s Programme II, which its benchmark covered bond is issued off.

For NBG, another factor in the upgrade was a reclassification to primary residence of properties backing almost half the cover pool.

“These were previously conservatively classified as ‘holiday home’ or ‘other’, which attract a 50% foreclosure of frequency increase compared with loans backed by primary residences,” the rating agency said. “The reclassification comes after the issuer created a new reporting system that more accurately retrieves the property purpose at the time of the loan’s origination.”

Partial cancellations of retained covered bonds were also a factor in the upgrades, as well as changes to the terms of Piraeus’s, Fitch said.

As well as upgrading the NBG and Piraeus programmes, the rating agency affirmed the BB+ rating of Alpha Bank covered bonds and removed them from Rating Watch Positive. All three programmes are on stable outlook.

Fitch noted that any material improvement of the refinancing spread assumptions for Greek residential mortgage loans is now unlikely given the increased volatility in bond spreads that followed the coronavirus pandemic outbreak.