Press Release

DBRS Morningstar Confirms AA Ratings of Caixa Geral Depósitos S.A. Covered Bonds (Obrigações Hipotecárias - Mortgages)

Covered Bonds
January 09, 2020

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AA ratings of the Obrigações Hipotecárias (OH; the Portuguese legislative covered bonds) issued under Caixa Geral de Depósitos, S.A.’s (CGD or the Issuer) covered bond programme (the Programme). The confirmations follow the completion of DBRS Morningstar’s full review of the ratings.

As of today, the total amount of bonds outstanding under the Programme is currently EUR 5.25 billion spread across five series, EUR 3.0 billion of which is retained.

The ratings are based on the following analytical considerations:
--A Covered Bonds Attachment Point (CBAP) of A (low), which is the Long-Term Critical Obligation Rating of CGD. CGD is the Issuer and the Reference Entity (RE) for the Programme. DBRS Morningstar does not consider OH to be a systemically important financing tool in Portugal; however, DBRS Morningstar considers the assets in the Programme to be strategic to the core activity of the RE.
--A Legal and Structuring Framework (LSF) Assessment of “Adequate” associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of BBB, which is the lowest CPCA in line with the assigned LSF-Implied Likelihood (LSF-L).
-- An LSF-L of A (high).
-- A two-notch uplift for high recovery prospects.
-- A level of overcollateralisation (OC) of 28% to which DBRS Morningstar gives credit, which is the level of OC the Issuer commits to maintain as stated in its quarterly investor reports. This level is not subject to haircut, as DBRS Morningstar has observed that it has been stable for the past 24 months.

DBRS Morningstar analysed the transaction with its European Covered Bond Cash Flow tool. The main assumptions focused on the timing of defaults, recoveries of the assets and interest rate stresses as well as market value spreads to calculate liquidation values on the cover pool (CP).

Everything else being equal, a downgrade of the CBAP by one notch would lead to a downgrade of the covered bonds rating by two notches. In addition, the ratings of the OH would be downgraded if any of the following occurred: (1) the sovereign rating of the Republic of Portugal (rated BBB (high) by DBRS Morningstar) was downgraded below BBB (high); (2) the CPCA were downgraded below BBB; (3) the quality of the CP and the level of OC were no longer sufficient to support a two-notch uplift for high recovery prospects; (4) the relative amortisation profile of OH and CP moved adversely; (5) the LSF Assessment associated with the Programme was downgraded; or (6) volatility in the financial markets caused the currently estimated market value spreads to increase.

As of September 2019, the total CP balance was roughly EUR 7.69 billion, including EUR 7.56 billion of mortgages and EUR 123.0 million of eligible securities and cash. There are currently EUR 5.25 billion of covered bonds outstanding under CGD OH, giving an estimated total OC of 46%.

As of September 2019, the mortgage CP comprised 173,107 residential mortgages granted to individuals with an average loan amount of EUR 43,695. The weighted-average unindexed loan-to-value of the mortgages was 50.88% with a seasoning of 138.2 months. The CP was mainly distributed in Lisbon (37.2% by outstanding balance), Northern Portugal (24.5%), and Central Portugal (21.1%).

The majority of the loans in the CP (99.3%) pay a floating interest rate indexed to Euribor, while 38.1% of the covered bonds are fixed rate. Since no swaps are in place to mitigate the interest rate mismatch, DBRS Morningstar has accounted for this in its analysis.

The CP assets and the OH are all denominated in euros. As such, investors are not currently exposed to any foreign exchange risk.

As of the date of this press release, the DBRS Morningstar-calculated weighted-average life of the CP was 12.7 years based on a 0% prepayment rate, which is longer than the 3.8 years weighted-average life on the OH when considering the expected maturity. This risk is mitigated by the OC available; a liquidity cushion available to cover three months of interest payments on the bonds; and a 12-month extendable maturity feature by which, should the Issuer default on its payment on the covered bonds at the respective expected maturity date, the covered bond maturities are automatically extended on a monthly basis up to 12 months.

DBRS Morningstar has assessed the LSF related to CGD OH as “Adequate” according to its rating methodology. For more information, please refer to the DBRS Morningstar commentaries, “DBRS Assigns LSF Assessment to Portuguese Covered Bonds” and “Portuguese Covered Bonds: Legal and Structuring Framework Review,” both available at

All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating and Monitoring Covered Bonds.” This can be found at

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of the principal methodology.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

Other methodologies and criteria referenced in this transaction are listed at the end of this press release. These may be found on at:

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” methodology at:

The sources of data and information used for these ratings include dynamic performance data, stratification tables, and loan-by-loan-level information on the CP provided by the Issuer that allowed DBRS Morningstar to further assess the portfolio.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 15 October 2019, when DBRS Morningstar upgraded the ratings of CGH OH to AA from AA (low) following the upgrade of the ratings of the Republic of Portugal.

Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies, is available on

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:

Ratings assigned by DBRS Ratings GmbH, Sucursal en España are subject to EU and US regulations only.

Lead Analyst: Antonio Laudani, Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 10 September 2012

DBRS Ratings GmbH, Sucursal en España
Calle del Pinar, 5
28006 Madrid

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland

The rating methodologies used in the analysis of this transaction can be found at:

-- Rating and Monitoring Covered Bonds
-- Rating and Monitoring Covered Bonds Addendum: Market Value Spreads
-- Global Methodology for Rating Banks and Banking Organisations
-- Legal Criteria for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions
-- Global Methodology for Rating Sovereign Governments

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at:

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