Press Release

DBRS Morningstar Upgrades Ratings on Banco BPI S.A. Covered Bonds (Obrigações Cobertas - Mortgages) to AA and Assigns Rating to Series 25

Covered Bonds
July 04, 2023

DBRS Ratings GmbH (DBRS Morningstar) upgraded its ratings on the Obrigações Cobertas (formerly designated “Obrigações Hipotecárias”; the Portuguese legislative covered bonds) issued under the Banco BPI S.A. (BPI or the Issuer) Covered Bond Programme (the Programme) to AA from AA (low).

The upgrade is driven by the conversion of the Programme to the updated covered bonds (CB) law (the Legal Regime of Covered Bonds). The law transposes the European Union CB Directive 2019/2162, which outlines the harmonisation of CB frameworks across Europe, into Portuguese law. Following the conversion, DBRS Morningstar assigned a Legal and Structuring Framework (LSF) Assessment of “Strong” to the programme, instead of the “Adequate” LSF Assessment assigned previously.

Concurrently, DBRS Morningstar assigned a rating of AA to the Series 25 issued under the Programme, a EUR 500 million fixed-rate bond paying a coupon of 3.625% and maturing on 4 July 2028. DBRS Morningstar also discontinued its rating on the Series 16 that matured on 30 May 2023.

Following the issuance of Series 25, there are eight series of CBs outstanding under the Programme totalling a nominal amount of EUR 7.0 billion.

The ratings are based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) reflective of the likelihood that the source of payments will switch from the Reference Entity (RE) to the cover pool (CP). BPI is the Issuer of and RE for the Programme. DBRS Morningstar considers Portugal as a jurisdiction in which CBs are a particularly important financing tool.
-- A Legal and Structuring Framework (LSF) Assessment of “Strong” associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of BBB (low), which is the lowest CPCA in line with the 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 16.2% to which DBRS Morningstar gives credit, which is the minimum level observed in the past 12 months adjusted by a scaling factor of 0.85.
-- The sovereign rating on the Republic of Portugal, rated A (low) with a Stable trend by DBRS Morningstar, as of the date of this press release.

DBRS Morningstar analysed the transaction using its 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 CP.

Everything else equal, a one-notch downgrade of the CBAP would lead to a one-notch downgrade of the LSF-L, resulting in a one-notch downgrade of the CB ratings.

In addition, all else unchanged, the CB ratings would be downgraded if any of the following occurred: (1) the CPCA was downgraded to 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 CBs and the CP moved adversely; or (4) volatility in the financial markets caused the currently estimated market value spreads to increase.

The aggregated outstanding balance of the CP backing BPI’s CBs was EUR 8.7 billion as of 31 March 2023 while the total amount of liabilities outstanding was EUR 7.0 billion, yielding a current OC ratio of 24.8%. The OC level to which DBRS Morningstar gives credit is 16.2%, after applying a scaling factor of 0.85 to the minimum level of OC observed during the past 12 months.

As at 31 March 2023, the CP assets comprised EUR 8.5 billion of outstanding mortgage loans and EUR 191 million of other assets. The mortgage CP had a weighted-average (WA) current unindexed loan-to-value ratio of 53.4% and a WA seasoning of 9.6 years. The CP is located mainly in Lisbon (40.4% by outstanding balance), northern Portugal (25.7%), and central Portugal (18.2%).

The vast majority of the loans in the CP (89.9%) are floating rate, indexed to different bases and reset at different times, while Series 22 and Series 25 are fixed rate and the remaining outstanding CB (85.7%) are linked to three- and six-month Euribor.

There are no swap agreements in the Programme’s documentation. DBRS Morningstar accounted for the interest rate mismatch in its analysis.

The WA life of the CP is 13.8 years, which is longer than the WA life of 3.0 years of the CBs, not accounting for any maturity extension. The resulting asset-liability maturity mismatch is mitigated by the extended maturity date, which falls one year after the maturity date, and by the available OC.

All CP assets and CBs 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 “Strong” according to its “Global Methodology for Rating and Monitoring Covered Bonds”. For more information, please refer to the publication “Portuguese Covered Bonds: Legal and Structuring Framework Review”, available at

DBRS Morningstar’s credit ratings on the CB series outstanding under this Programme address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are listed at the end of this press release.

DBRS Morningstar’s credit rating does not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at (4 July 2023).

All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: Global Methodology for Rating and Monitoring Covered Bonds (8 May 2023),

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

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 focused on the changes in the Programme’s documentation aimed at aligning the Programme with the Legal Regime of Covered Bonds, and on the final terms of Series 25.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit 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" at:

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report:

The sources of data and information used for these credit ratings include stratification tables as at 31 March 2023, loan-by-loan data on the CP as at 31 December 2022, and static delinquencies (90+ days) by vintage of origination spanning from 2007 to 2022 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 credit ratings, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the credit rating analysis.

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

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

The last rating action on this transaction took place on 24 March 2023, when DBRS Morningstar confirmed its AA (low) ratings on the CBs outstanding under the Programme.

Information regarding DBRS Morningstar credit 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: For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see

These credit ratings are 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: 1 April 2015

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Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
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The credit rating methodologies used in the analysis of this transaction can be found at:

-- Global Methodology for Rating and Monitoring Covered Bonds (8 May 2023),
-- Global Methodology for Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (08 May 2023),
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (Master Methodology and Portugal Addendum) (5 June 2023) and European RMBS Credit Model v,
-- Global Methodology for Rating Banks and Banking Organisations (22 June 2023),
-- Legal Criteria for European Structured Finance Transactions (30 June 2023),
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2022),
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022),
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022),
-- Global Methodology for Rating Sovereign Governments (29 August 2022),
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (4 July 2023),

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