Insider Business Fitch revises BoC covered bonds' outlook to positive, affirms at A

Fitch revises BoC covered bonds’ outlook to positive, affirms at A

Fitch Ratings has revised Bank of Cyprus Public Company Limited’s (BoC, B-/Positive/B) conditional pass-through (CPT) mortgage covered bonds’ Outlook to Positive from Stable and affirmed the rating at A.

The rating action follows the Outlook revision to Positive (from Stable) on Cyprus’ Long-Term Foreign-Currency Issuer Default Rating (IDR)  dated October 11, 2019.

According to Fitch the Positive Outlook mirrors that on Cyprus’ IDR. It also takes into account the unused notches in terms of uplift factors applicable to the programme rating and reflects Fitch’s expectations that the relied-upon overcollateralisation (OC) would be sufficient to withstand stresses associated with higher rating scenarios should the Country Ceiling be upgraded.

The A rating is based on BoC’s Long-Term B- IDR, the various uplifts above the IDR granted to the programme and the publicly committed OC relied upon by Fitch. The covered bonds are rated 10 notches above the bank`s IDR as the Country Ceiling constraints the rating at A. This is out of a maximum achievable uplift of 12 notches, consisting of an IDR uplift of two notches, a payment continuity uplift (PCU) of eight notches and a recovery uplift of two notches.

In its analysis, Fitch relies on the publicly committed OC of 47% disclosed in the investor report as at September 2019, which provides more protection than the unchanged A breakeven OC of 33.5%.

The 47% OC supports timely payments at the BBB+ tested rating on a probability of default (PD) basis and allows a two-notch recovery uplift up to the covered bonds’ A rating. The greatest contributor to the A breakeven OC remains the ALM (asset and liability mismatch) loss (25.8%) followed by the credit loss (7.8%).

Fitch said that the rating of the covered bonds would be upgraded, if Cyprus’ Country Ceiling is upgraded, provided sufficient OC is available to sustain stresses in rating scenario higher than the A rating level. All else being equal, an upgrade of the bank’s IDR would have no impact on the covered bonds’ rating.

The covered bonds would be vulnerable to downgrade if the programme’s overcollateralisation (OC) commitment decreases below Fitch`s 33.5% A breakeven OC, Fitch noted.

(Cyprus news Agency)

Top Stories

EU sets up financial crime unit as pandemic poses new risks

    The European Union on Friday set up a unit of investigators to tackle an expected surge in finanial crime in the economic downturn triggered...

Higher risk of serious Covid-19 infection for A+ blood type, new study finds

People with A+ blood type are at increased risk compared to other blood types for respiratory failure and death due to a severe Covid-19...

BirdLife Cyprus invites pubic to join swallow monitoring programme

  BirdLife Cyprus is inviting the public to help their programme to record the island's swallow population. In a post on Facebook, the NGO asked members...

Article that found risks in hydroxychloroquine against COVID-19 retracted

  An influential medical journal article that found hydroxychloroquine increased the risk of death in COVID-19 patients was retracted on Thursday, adding to controversy around...

Latest on the worldwide spread of the coronavirus

Latest update: 05/06/2020 08:16 The U.S. government is working with drugmakers to maximize availability of influenza vaccines, worried that a substantial flu season on top...


Poulles (Υoung kolokassi)

Either you thrash the coriander seeds in a mortar, without making them into dust, or you gradually crush them in a blender. Remove the edges...

Pork cooked in wine

Crush the coriander seeds in a pestle and mortar or pulse-blend in a blender, taking care not to over-grind. Put the meat in bowl (not...

Lefkaritikos tavas – O ‘protinos’

Wash and dry the meat and rice separately. In a ‘tava’ (oven proof deep clay pot) first put a layer of five-six pieces of meat...

Local cuisine: An introduction

Rich in fresh ingredients and tasty herbs, offers the very best of Mediterranean culinary delights. Head out to a tavern and feast on a...