Press Release

DBRS Morningstar Confirms “A” Rating on Banco Comercial Português S.A. Covered Bonds Series 8

Covered Bonds
April 23, 2020

DBRS Ratings GmbH (DBRS Morningstar) confirmed its “A” rating on Series 8 of the Obrigações Hipotecárias (OH; the Portuguese legislative covered bonds) issued under the Banco Comercial Português (BCP or the Issuer) EUR 12.5 billion Covered Bonds programme (the Programme). The confirmation follows the amendment of Series 8.

According to its restated terms, the expected maturity of Series 8 was updated to 23 October 2023 and the extended maturity date to 23 October 2024; the outstanding volume of the series was increased to EUR 4 billion and the coupon to one-month Euribor + 0.75%. These amendments have no impact on the ratings of the covered bonds outstanding under the Programme.

The rating is based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of BBB (high), which is the Long-Term Critical Obligations Rating of BCP. BCP is the Issuer and Reference Entity (RE) for the Programme.
-- A Legal and Structuring Framework (LSF) Assessment of “Average” associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of BB, which is the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-L of BBB (high).
-- A two-notch uplift for high recovery prospects.
-- A committed minimum overcollateralisation of 14%. DBRS Morningstar gives full credit to such commitment in accordance with its methodology. Such a level is not subject to haircut as DBRS Morningstar considers it to be persistent based on historically observed levels.

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

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

There are five series of OH outstanding under the Programme totalling a nominal amount of EUR 10.2 billion, while the aggregate balance of mortgages in the CP was EUR 11.67 billion as of December 2019, yielding a current OC ratio of 14.5%. The Issuer has publicly committed to maintain an OC level of 14.0%.

As of 31 December 2019, the cover pool comprised 222,954 residential mortgages granted to individuals, with an average loan amount of EUR 52,364. The weighted-average (WA) current loan-to-value ratio was 52.4% with a seasoning of 110 months. The CP is located mainly in Lisbon (42.7%), Northern Portugal (29.7%), and Central Portugal (14.6%).

Of the loans in the portfolio, 85.2% pay a floating interest rate and 14.8% of the loans pay a fixed rate, while 14.8% of the covered bonds are fixed rate.

The DBRS Morningstar-calculated weighted-average life of the mortgage assets is roughly 14 years, which is longer than the 2.25 years of WA life on the covered bonds, not accounting for any maturity extension. This generates an asset-liability mismatch that is mitigated by the extended maturity date, which falls one year after the maturity date, and by the OC in place.

All CP assets and CB are denominated in euros. As such, investors are not currently exposed to any foreign-exchange risk.

DBRS Morningstar assessed the LSF related to the Programme as “Average” according to its “Rating and Monitoring Covered Bonds” methodology. For more information, please refer to DBRS Morningstar’s commentaries: “DBRS Assigns LSF Assessment to Portuguese Covered Bonds” and “Portuguese Covered Bonds: Legal and Structuring Framework Review” both available at

For further information on the Programme, please refer to the rating report at

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at:

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

On 13 March 2023, DBRS Morningstar amended the above press release to correct the Initial Rating Date.

All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is “Rating and Monitoring Covered Bonds” (28 June 2019).

In DBRS Morningstar’s opinion, the changes under consideration do not require the application of the entire principal methodology. Therefore, DBRS Morningstar focused on the cash flow analysis.

A review of the transaction legal documents was limited to the documentation pertaining to the amendment of Series 8. All other transaction documents have remained unchanged since the most recent rating action.

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

These may be found 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 the rating include investor reports and stratifications tables provided by the issuer.

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

At the time of the initial ratings, 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 this rating s 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 6 March 2020, when DBRS Morningstar confirmed its “A” ratings of BCP’s outstanding OH.

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: Covadonga Aybar, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 28 February 2012

DBRS Ratings GmbH, Sucursal en España
Calle del Pinar, 5
28006 Madrid
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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

-- Rating and Monitoring Covered Bonds (28 June 2019)
-- Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (28 June 2019)
-- Global Methodology for Rating Banks and Banking Organisations (11 June 2019)
-- Legal Criteria for European Structured Finance Transactions (11 September 2019)
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (10 December 2019) and European RMBS Credit Model v
-- Operational Risk Assessment for European Structured Finance Originators (28 February 2020)
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020)
-- Global Methodology for Rating Sovereign Governments (17 September 2019)

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

For more information on this credit or on this industry, visit or contact us at [email protected].