Overview
- On March 18, 2022, we affirmed our unsolicited 'A/A-1' long- and short-term sovereign credit ratings on Spain, and revised the outlook on the ratings to stable from negative.
- Following this action and the application of our criteria, we affirmed our 'AA+' ratings on BBVA's mortgage covered bonds. We also revised the outlook on the ratings to stable from negative.
- Our outlook on the ratings reflects the stable outlook on our long-term sovereign rating on Spain.
MADRID (S&P Global Ratings) March 28, 2022--S&P Global Ratings today revised to stable from negative its outlook on the credit ratings on Banco Bilbao Vizcaya Argentaria S.A.'s (BBVA) mortgage covered bond program and related issuances ("cédulas hipotecarias"). We have also affirmed our 'AA+' ratings on the covered bonds.
Today's rating action follow our March 18, 2022 action on Spain (see "Spain Outlook Revised To Stable From Negative On Balanced Growth; 'A/A-1' Ratings Affirmed").
Our ratings on BBVA's mortgage covered bonds reflect the application of our covered bonds criteria, our structured finance sovereign risk criteria, and the remaining criteria referenced in the related criteria section below.
Under our sovereign risk criteria, BBVA's mortgage covered bonds can be rated up to four notches above the sovereign rating, if there is sufficient overcollateralization to withstand a sovereign default. As BBVA's covered bond program meets these conditions, and considering the current foreign currency rating on Spain (A/Stable/A-1; unsolicited), the covered bonds can achieve a maximum potential rating of 'aa+'.
The available credit enhancement in the program continues to support the four potential notches of collateral-based uplift above the jurisdiction-supported rating level (JRL). However, we reduce these four notches by one notch because there is currently no commitment from the issuer to maintain overcollateralization commensurate with the current rating on the covered bonds. We do not further reduce the potential collateral-based uplift to account for the lack of 180 days of liquidity, because liquidity risk is captured in our sovereign risk criteria by limiting the number of notches of uplift above the sovereign rating to four. Therefore, the maximum collateral-based uplift is three notches above the JRL, leading to a maximum achievable covered bond rating of 'aa+' according to our covered bonds criteria.
Further, the ratings on the covered bonds are not constrained by counterparty, legal, and operational risks, in our view.
As a result of the above, we have revised the outlook to stable from negative on our 'AA+' ratings on BBVA's mortgage covered bond program and related issuances. We have also affirmed our 'AA+' ratings on the covered bonds.
The stable outlook on our ratings on the covered bonds reflects the stable outlook on our long-term sovereign rating on Spain. This means that a rating action on the sovereign would result in a similar rating action on BBVA's covered bonds, all else being equal.
The outlook on the issuer credit rating on BBVA does not currently affect the outlook on the covered bonds. Because the covered bonds have one unused notch of jurisdictional support, a downgrade of BBVA by one notch would not affect the ratings on the covered bonds, all else being equal.
Related Criteria
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- Criteria | Structured Finance | General: Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities, Dec. 22, 2020
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
- Criteria | Structured Finance | RMBS: Global Methodology And Assumptions: Assessing Pools Of Residential Loans, Jan. 25, 2019
- Criteria | Structured Finance | General: Foreign Exchange Risk In Structured Finance--Methodology And Assumptions, April 21, 2017
- Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
- Criteria | Structured Finance | Covered Bonds: Covered Bond Ratings Framework: Methodology And Assumptions, June 30, 2015
- Criteria | Structured Finance | Covered Bonds: Methodology And Assumptions: Analyzing European Commercial Real Estate Collateral In European Covered Bonds, March 31, 2015
- Criteria | Structured Finance | Covered Bonds: Covered Bonds Criteria, Dec. 9, 2014
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
Related Research
- Outlook Revised To Stable On Top Spanish Banks And Subsidiaries Following Similar Action On Spain; Ratings Affirmed, March 22, 2022
- Spain Outlook Revised To Stable From Negative On Balanced Growth; 'A/A-1' Ratings Affirmed, March 18, 2022
- Global Covered Bond Insights Q1 2022, March 17, 2022
- Spanish Covered Bond Market Insights, March 8, 2022
- S&P Global Ratings Definitions, Nov. 10, 2021
- Transaction Update: Banco Bilbao Vizcaya Argentaria S.A. (Mortgage Covered Bonds), Sept. 23, 2021
- Banco Bilbao Vizcaya Argentaria S.A., Sept. 17, 2021
- S&P Global Ratings' Covered Bonds Primer, June 20, 2019
- Glossary Of Covered Bond Terms, April 27, 2018
| Primary Credit Analyst: | Maria Luisa Gomez Grande, Madrid + 34 91 788 7208; marisa.gomez@spglobal.com |
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