DBRS Confirms Ratings on Banco Popular Portugal Covered Bonds Programme

DBRS Rating Limited (DBRS) has today confirmed the rating of ‘BBB’ on all outstanding series of obrigações hipotecárias (the Portuguese legislative covered bonds) issued under €1,500,000,000 Banco Popular Portugal (“BPP”) Covered Bonds Programme (the “Programme”). The confirmation follows the completion of the annual review process. There are EUR 815 million covered bonds outstanding under the Programme.

The rating reflects the following analytical considerations:
• The senior unsecured Long-Term Debt and Deposit rating of BPP (the “Issuer”) of ‘BBB’ with Negative Trend confirmed on 31 July 2013.
• DBRS Legal and Structuring Framework (LSF) assessment of “Adequate”.
• BPP’s capabilities with respect to origination of the cover pool (CP) and servicing of the CP.

The Issuer was not able to provide a set of historical performance data sufficient for DBRS to form a view on the support provided by the CP in case of an assumed default of BPP. As a result, BPP covered bonds are rated at the same level of the issuer. DBRS recognises the dual recourse claim of covered bond holders in case of an issuer default; however, no uplift from the issuer rating can be granted at this stage to BPP Covered Bonds. DBRS keeps monitoring the rating and, should sufficient information be available in the future, this will be incorporated in the analysis.

All else being equal, a downgrade of the Issuer rating by one notch would lead to a downgrade of the covered bonds by one notch.

As of June 2014, the total outstanding amount of covered bonds was EUR815 million whilst the aggregate balance of the CP was EUR866 million resulting in a Nominal Over-collateralization (OC) of 6.28%. This compares to the 5.26% minimum OC legally required. The CP is formed by residential (84.09%) and commercial (15.91%) mortgage loans. This is a 67-month seasoned CP that is geographically concentrated in Lisbon (54%), North of Portugal (22%) and in the centre area of the country (14%).

Notes:
All figures are in Euros unless otherwise noted.

The principal methodology applicable is: “Rating European Covered Bonds”. This can be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include data related to the CP provided by BPP. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this Programme took place on 26 September 2013, when DBRS confirmed the ratings on all outstanding covered bonds issued under the Programme.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Keith Gorman
Initial Rating Date: 31 August 2012
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 26 September 2013

The lead and back-up responsibilities for this transaction have been transferred to Valentina Cicerone and Vito Natale, respectively.

Lead Analyst: Valentina Cicerone
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

• Rating European Covered Bonds
• Global Methodology for Rating Banks & Banking Organisations
• Legal Criteria for European Structured Finance Transactions
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model Methodology for European Securitisations