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Eurobank's Conditional Pass-Through Covered Bonds III Ratings Affirmed Following Review

Overview

  • As part of our ongoing surveillance, we have reviewed our ratings on Eurobank's covered bond program III (Eurobank CB III) and the related series issued under it.
  • The program's available and committed credit enhancement remain commensurate with the currently assigned ratings.
  • We have therefore affirmed our 'A-' ratings on the covered bond program and related issuance.
  • We do not assign outlooks for ratings on programs whose creditworthiness we believe does not depend on that of the issuing bank.

MILAN (S&P Global Ratings) Nov. 18, 2021--S&P Global Ratings today affirmed its 'A-' credit ratings on Eurobank S.A.'s (Eurobank; B+/Stable/B) conditional pass-through covered bond program III and the series issued under it.

We have updated our credit and cash flow analysis based on the specific adjustments defined for Greece under our global RMBS criteria (see "Global Methodology And Assumptions: Assessing Pools Of Residential Loans," published on Jan. 25, 2019). The combined effect of the portfolio's updated credit quality and the application of our revised criteria has led to a decline in the collateral credit losses commensurate with the currently assigned ratings.

Moreover, we have analyzed the newly introduced insolvency legislation (L.4738/2020), in particular the provisions relating to households, which we see as credit positive compared with previous frameworks. In our view, the law brings more clarity around creditors' rights and proceedings, and removes primary residence protection from foreclosure.

The ratings on the program and related issuance continue to be derived from the application of our structured finance sovereign risk criteria. We consider covered bonds backed by residential mortgage assets to have low sensitivity to sovereign risk (see "Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions," published on Jan. 30, 2019). In conjunction with the program's structural features, which fully address refinancing risk (through the conditional pass-through structure), the program could achieve a rating up to six notches above the rating on the sovereign. Ratings below the cap typically result from considerations of relative creditworthiness, credit stability, the sovereign rating and outlook, and the application of other criteria. Greek covered bonds do not currently qualify for the maximum rating differential and can be rated up to five notches above the sovereign. Given our current long-term sovereign rating on Greece (BB/Positive), the maximum rating the mortgage covered bonds can achieve above the current rating on the sovereign is 'A-'.

The program's available and committed credit enhancement remain commensurate with the currently assigned ratings.

There are currently no rating constraints to the assigned rating relating to counterparty, legal, or administrative and operational risks. We do not assign outlooks for ratings on programs whose creditworthiness we believe does not depend on that of the issuing bank.

Related Criteria

Related Research

Primary Credit Analyst:Adriano Rossi, Milan + 390272111251;
adriano.rossi@spglobal.com
Research Contributor:Nidhi Nair, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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