Press Release

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

Covered Bonds
January 08, 2021

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.

At the same time, DBRS Morningstar discontinued its AA rating on Series 10, which fully repaid on 27 January 2020 as it reached its final maturity date.

As of today, the total amount of bonds outstanding under the Programme is currently EUR 4.25 billion spread across four 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 32% to which DBRS Morningstar gives credit, being the minimum level of OC observed in the last 12 months adjusted by a scaling factor of 0.85. Additionally, the Issuer commits to maintain a minimum OC of 28% stated in the quarterly investor reports. Such level is not subject to haircut, as DBRS Morningstar has observed that it has been persistent 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 2020, the total CP balance was roughly EUR 6.69 billion, including EUR 6.56 billion of mortgages and EUR 124.8 million of eligible securities and cash. There are currently EUR 4.25 billion of covered bonds outstanding under CGD OH, giving an estimated total OC of 57%.

As of September 2020, the mortgage CP comprised 152,399 residential mortgages granted to individuals with an average loan amount of EUR 43,058. The weighted-average unindexed loan-to-value of the mortgages was 49.6% with a weighted-average seasoning of 148.2 months. The CP was mainly distributed in Lisbon (37.4% by outstanding balance), Northern Portugal (24.3%), and Central Portugal (21.0%).

The majority of the loans in the CP (99.3%) pay a floating interest rate indexed to Euribor, while 23.5% 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 12.3 years based on a 0% prepayment rate, which is longer than the 3.7 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

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may increase in the coming months for many CPs, some meaningfully. The ratings are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. In the CP analysis of this programme, DBRS Morningstar assumed a moderate decline in residential property prices.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were last updated on 2 December 2020. For details, see the following commentaries: and The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 24 April 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated covered bonds in Europe. For more details, please see: and

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:

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

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

All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating and Monitoring Covered Bonds” (27 April 2020). 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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” methodology at: :

The sources of data and information used for these ratings include stratification tables and loan-by-loan-level information on the CP as of September 2020 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 9 January 2020, when DBRS Morningstar confirmed the ratings of CGH OH at AA following a full review of the Programme.

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: DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage:

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

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
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500

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

-- Rating and Monitoring Covered Bonds (27 April 2020),
-- Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (27 April 2020),
-- Global Methodology for Rating Banks and Banking Organisations (8 June 2020),
-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
-- Interest Rate Stresses for European Structured Finance Transactions (28 September 2020),
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (21 September 2020) and European RMBS Credit Model v,
-- Operational Risk Assessment for European Structured Finance Originators (30 September 2020),
-- Operational Risk Assessment for European Structured Finance Servicers (19 November 2020),
-- Global Methodology for Rating Sovereign Governments (27 July 2020),

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