Standard & Poor’s cut Bankia mortgage covered bonds from BBB+ to BBB yesterday (Tuesday) after a downgrade of the issuer, but revised the CreditWatch from Negative to Developing in anticipation of receiving more information on the programme after the issuer transferred assets to Spain’s bad bank.

S&P downgraded Bankia and its parent Banco Financiero y de Ahorros from BB to B- on 25 March as some recapitalisation measures undertaken by the financial institutions are now seen by the rating agency as resulting in less capital strengthening than expected.

As Bankia’s cédulas are rated the maximum four notches possible above the issuer rating, S&P cut the covered bond programme by one notch to match the downgrade of Bankia.

The CreditWatch status of the programme was revised from Negative to Developing to reflect the completion of a transfer of assets to Spain’s bad bank Sareb and Bankia’s early redemption of some covered bonds, said the rating agency.

S&P said it is receiving information from Bankia on the programme following the transfer and will resolve the CreditWatch in the coming weeks.

The downgrade of Bankia’s cédulas hipotecarias comes after S&P last Wednesday (27 March) upgraded NCG Banco mortgage covered bonds due to the impact of a transfer of assets to Sareb and early redemptions, which had given at least one analyst grounds to believe Bankia cédulas would be similarly affected.

He noted that yesterday’s rating action did not take account of the transfer of assets to Sareb and that, based on a comparison of the impact on the quality of OC following the transfer of assets in the case of Bankia’s and NCG Banco’s programmes, he would expect S&P to maintain Bankia’s cédulas at BBB, or even possibly upgrade them.