Morningstar DBRS Confirms AA (high) Credit Ratings on Caixa Geral De Depósitos S.A. Covered Bonds (Obrigações Cobertas - Mortgages)

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AA (high) credit ratings on all outstanding series issued under the Caixa Geral De Depósitos S.A. Covered Bonds (CB) Programme (Obrigações Cobertas - Mortgages). The confirmations follow the completion of Morningstar DBRS' full review of the credit ratings.

The credit rating is based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of A (high), which is CGD's Long Term Critical Obligations Rating. CGD is the Issuer and the Reference Entity (RE) for the programme. Morningstar DBRS considers Portugal a jurisdiction for which CB are a particularly important financing tool and the assets in the programme to be strategic to the RE's core activity.
-- 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 AA (low).
-- A two-notch uplift for high recovery prospects.
-- A level of overcollateralisation (OC) of 21.3% to which Morningstar DBRS gives credit, which is the minimum level observed in the past 12 months adjusted by a scaling factor of 0.85.
-- The sovereign credit rating on the Republic of Portugal, rated "A" with a Positive trend by Morningstar DBRS as of the date of this press release.

Morningstar DBRS 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 cover pool (CP).

Everything else being 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 credit ratings.

In addition, all else unchanged, the CB credit ratings would be downgraded if any of the following occurred: (1) the sovereign credit rating on the Republic of Portugal were downgraded below A (low); (2) the CPCA were downgraded below BBB (low); (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 the CB and CP moved adversely; (5) the LSF Assessment associated with the programme were downgraded to Average or below; or (6) volatility in the financial markets caused the currently estimated market value spreads to increase.

The total outstanding amount of CB is currently EUR 5.0 billion, while as of end September 2024, the aggregate balance of mortgages and other assets in the CP was EUR 6.5 billion. This resulted in a total estimated OC of 29.6%. The OC level to which Morningstar DBRS gives credit is 21.3%, after applying a scaling factor of 0.85 to the minimum level of OC observed during the past 12 months. The Issuer has publicly committed to maintaining an OC level of 20% to which Morningstar DBRS gives full credit, in accordance with its Global Methodology for Rating and Monitoring Covered Bonds.

As of September 2024, the mortgage CP comprised 70,511 residential mortgages granted to individuals with an average loan amount of EUR 89,913. The weighted-average (WA) unindexed loan-to-value ratio of the mortgages was 59.9% with a WA seasoning of 74.8 months. The CP was mainly distributed in Lisbon (53.8% by outstanding balance), Northern Portugal (19.1%), and Central Portugal (13.2%).

Of the loans in the portfolio, 59.7% pay a floating interest rate and 40.3% pay a fixed rate, while 100% of the CB are floating rate. This asset-liability interest rate mismatch is mitigated by the available OC.

The Morningstar DBRS-calculated WA life of the mortgage assets is roughly 18.4 years, which is longer than the WA life of 3.9 years on the CB, not accounting for any maturity extension. This generates an asset-liability mismatch that is mitigated by the available OC and the extended maturity date, which falls one year after the maturity date.

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

Morningstar DBRS has assessed the LSF related to the programme as "Strong" according to its rating methodology. For more information, please refer to Morningstar DBRS' publication "Portuguese Covered Bonds: Legal and Structuring Framework Review", available at www.dbrsmorningstar.com.

Morningstar DBRS' 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 amounts.

Morningstar DBRS' 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, AND GOVERNANCE CONSIDERATIONS
Credit rating actions on the Issuer are likely to have an impact on this credit rating.

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 Risk Factors in Credit Ratings" (13 August 2024) 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 (02 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 Credit 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 this credit rating include dynamic performance data, stratification tables and loan-by-loan-level information on the CP as of September 2024.

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 affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing this credit rating 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 assigned AA (high) ratings to Series 19.

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.

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

Lead Analyst: Marcos Meier, Assistant Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 10 September 2012

DBRS Ratings GmbH, Sucursal en España
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28046 Madrid, Spain
Tel. +34 (91) 903 6500

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

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
--European RMBS Insight Methodology (18 September 2024), https://dbrs.morningstar.com/research/439573 and European RMBS Insight model v 10.0.0.0.
--European RMBS Insight: Portuguese Addendum (19 April 2024),
https://dbrs.morningstar.com/research/431376
--Global Methodology for Rating Banks and Banking Organisations (4 June 2024),
https://dbrs.morningstar.com/research/433881
--Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024),
 https://dbrs.morningstar.com/research/443196
--Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024),
https://dbrs.morningstar.com/research/439571
--Interest Rate Stresses for European Structured Finance Transactions (24 September 2024),
https://dbrs.morningstar.com/research/439913
--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://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.