Morningstar DBRS Upgrades Credit Ratings on EUR 10,000,000,000 Piraeus Bank SA Global Covered Bonds Programme (GCB - Mortgages - CPT) to A (low) from BBB (high)

DBRS Ratings GmbH (Morningstar DBRS) upgraded its credit ratings on the Greek Covered Bonds (GCB or the Greek legislative covered bonds) issued under the EUR 10,000,000,000 Piraeus Bank SA Global Covered Bonds Programme (the Programme) to A (low) from BBB (high).

This credit rating action is motivated by the trend observed in the performance of the Cover Pool (CP) during the last year, and by the analysis of updated performance data provided by the Issuer on its residential mortgage book.

There are currently four series currently outstanding under the Programme, totalling a nominal amount of EUR 2.5 billion.

Morningstar DBRS based its credit ratings on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of BBB (low), which is the Long Term COR of Piraeus. Piraeus is the Issuer and Reference Entity (RE) for the Programme. Morningstar DBRS does not currently classify Greece as a jurisdiction for which covered bonds (CB) are a particularly important financing tool. Piraeus is subject to the European Union's Bank Recovery and Resolution Directive. The CP is composed of residential mortgage loans. Morningstar DBRS considers it likely that this form of lending would be part of the activity of a going-concern entity possibly resulting from the resolution of the RE.
-- A Legal and Structuring Framework (LSF) Assessment of "Very Strong" associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of BB, being the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-L of BBB (high).
-- A one-notch uplift for good recovery prospects.
-- A level of overcollateralisation (OC) of 29.1% to which Morningstar DBRS gives credit, being the minimum observed OC level during the past 12 months adjusted by a scaling factor of 0.90. The Issuer contractually commits to maintain a minimum 25% OC level in the nominal value test.
-- The sovereign credit rating on the Hellenic Republic, rated BBB (low) with a Stable trend by Morningstar DBRS, as of the date of this press release.

Morningstar DBRS analysed the transaction with its European Covered Bond Cash Flow tool and its Common RMBS tool. The main assumptions focused on the timing of defaults and recoveries of the assets and interest rate stresses. In accordance with Morningstar DBRS's "Global Methodology for Rating and Monitoring Covered Bonds", Morningstar DBRS did not consider any forced asset liquidation for this transaction, given the conditional pass-through structure, and assumed several prepayment scenarios.

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

In addition, everything else equal, Morningstar DBRS would downgrade the credit ratings if any of the following occurred: (1) the CPCA was downgraded below BB or (2) the LSF Assessment associated with the Programme was downgraded to "Average" or below.

Citibank N.A./London Branch (Citibank London) acts as the transaction bank and holds a reserve in a dedicated ledger of the transaction account. Based on Morningstar DBRS's private credit rating on this bank and the replacement provisions included in the transaction documentation, Morningstar DBRS considers the risk of such counterparty to be consistent with the credit ratings assigned, in accordance with its "Legal Criteria for European Structured Finance Transactions" and "Global Methodology for Rating and Monitoring Covered Bonds".

The total outstanding amount of bonds outstanding under the Programme is currently EUR 2.5 billion while the aggregate balance of loans (as at June 2024) in the CP was EUR 3.6 billion of first-lien residential mortgage loans, resulting in a total OC of 44.7%.

As at June 2024, the CP comprised 83,908 residential mortgage loans originated by Piraeus. The weighted-average (WA) unindexed current loan-to-value ratio of the mortgages was 48.6% and the WA seasoning was 13.5 years. The assets securing the loans in the CP are located predominantly in the regions of Attica (44.3% by outstanding loan amount), Thessaloniki (11.9%), and Macedonia (8.8%).

The CP comprises 97.9% floating-rate mortgage loans, indexed to different bases, which reset at different dates. This compares with 100% of the liabilities paying a floating rate linked mostly to three-month Euribor. The resulting interest and basis risks are not hedged.

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

Morningstar DBRS assessed the LSF related to the Programme as "Very Strong" according to its credit rating methodology. For more information, please refer to the Morningstar DBRS commentary "Greek Covered Bonds: Legal and Structuring Framework Review" on https://dbrs.morningstar.com.

Morningstar DBRS's credit ratings on the outstanding CB series address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related interest payment amounts and the related principal amount.

Morningstar DBRS's long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Credit rating actions on the Issuer are likely to have an impact on these credit ratings.

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781.

Notes:
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" (2 April 2024), https://dbrs.morningstar.com/research/430636.

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

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

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

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 Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include investor reports until 30 June 2024, loan-by-loan data on the CP as of 30 June 2024, repossession data from 2009 to 2023, static pool default and recovery data from 2005 to 2023, and dynamic pool nonperforming loans and arrears data from 2007 to 2023 provided by the Issuer.

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

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

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

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

The last credit rating action on this transaction took place on 13 December 2023, when Morningstar DBRS upgraded its credit ratings on the CBs outstanding under the Programme to BBB (high) from BBB (low).

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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: 27 August 2018

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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Global Methodology for Rating and Monitoring Covered Bonds (2 April 2024), https://dbrs.morningstar.com/research/430636.

-- Common RMBS Rating Methodology (15 April 2024),
https://dbrs.morningstar.com/research/431219.

-- Global Methodology for Rating Banks and Banking Organisations (4 June 2024), https://dbrs.morningstar.com/research/433881.

-- Legal Criteria for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435165.

-- Operational Risk Assessment for European Structured Finance Servicers (6 August 2024), https://dbrs.morningstar.com/research/437543.

-- Operational Risk Assessment for European Structured Finance Originators (6 August 2024), https://dbrs.morningstar.com/research/437541 .

-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435278/.

-- Global Methodology for Rating Sovereign Governments (15 July 2024), https://dbrs.morningstar.com/research/436000 .

-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781.

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.