TEXT-S&P asgns rtgs to Banca Civica's mortgage/public cov bonds

(The following statement was released by the rating agency)

Jan 19 -

OVERVIEW

-- On Dec. 23, 2011, we assigned a counterparty credit rating to Spanish bank Banca Civica (BBB/Negative/A-2).

-- Today, we have assigned long-term ratings to Banca Civica's mortgage covered bonds (AA+) and public-sector covered bonds (A+).

-- Additionally, we have assigned a negative outlook to both types of covered bonds.

-- Banca Civica was created in June 2010 through the integration of three Spanish savings banks (Caja de Burgos, Caja Canarias, and Caja Navarra ) and was joined in December 2010 by Cajasol.

-- Our ratings on the public-sector covered bonds are based on our criteria for rating covered bonds. However, certain aspects of the methodologies and assumptions underlying these criteria are under review. As a result of this review, our future methodologies and assumptions applied to rate covered bonds may differ from the current criteria. The ratings on all outstanding public-sector covered bonds in these programs may be affected as a result of this review.

Standard & Poor's Ratings Services today assigned its 'AA+' long-term credit rating to Banca Civica S.A.'s (BBB/Negative/A-2) mortgage covered bonds (cedulas hipotecarias--CHs), and its 'A+' long-term credit rating to Banca Civica's public-sector covered bonds (cedulas territoriales--CTs). The outlook is negative for all of these bonds (see list below).

The bank's primarily retail banking focus, and its strong 25%-35% market shares in both deposits and loans in the four Spanish regions where it mainly operates (Burgos, Navarra, western Andalucia, and Tenerife), enhance the stability of its business franchise and earnings, in our view (see "Spain-Based Banca Civica Assigned 'BBB/A-2' Ratings; Outlook Negative," published on Dec. 23, 2011. Banca Civica was created in June 2010, through the integration of three Spanish savings banks (Caja Navarra, Caja de Burgos, and Caja Canarias). It was joined in December 2010 by Andalucian Cajasol (Monte de Piedad y Caja de Ahorros San Fernando de Guadalajara, Huelva, Jerez y Sevilla ), which itself was the result of a 2006 merger of two savings banks.

Banca Civica was formed to achieve scale and efficiency in light of the weak operating environment in Spain. It also received financial support from Fondo de Reestructuracion Ordenada Bancaria (FROB), a Spanish government support unit for banks in difficulties, to facilitate a substantial clean-up of problematic loans and foreclosed property.

The mortgage and public-sector covered bonds that we have rated today have been issued by the four Spanish savings banks that merged into Banca Civica. Some of these issued covered bonds form part of the collateral in several Spanish multicedulas transactions, and others have been issued directly into the market.

In assigning today's ratings, we applied our 2009 covered bond criteria (see "Revised Methodology And Assumptions For Assessing Asset-Liability Mismatch Risk In Covered Bonds," published on Dec. 16, 2009).

We have applied our five-step approach and have assessed the current asset-liability mismatch (ALMM) risk measure (step 1), the program's categorization (step 2), the maximum potential covered bond ratings uplift (step 3), the cash flow and market value risk (step 4), and the credit enhancement provided (step 5).

In addition, we apply our criteria on nonsovereign ratings that exceed European Economic and Monetary Union (EMU or eurozone) ratings (see "Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions," published on June 14, 2011). These criteria apply to all EMU-based nonsovereign issuers, EMU-originated structured finance transactions, and covered bonds that we rate above the related sovereign in the EMU.

We have assigned today's ratings based on our review of the most recent asset and cash flow information we have received, as well as discussions with the issuer to understand the planned issuance profile and the expected levels of credit enhancement.

We will surveil the ratings on these covered bonds and the evolution of overcollateralization and cash flow coverage, as well as any changes to the bank's counterparty rating. In particular, we intend to review these factors each time Banca Civica issues new mortgage or public-sector covered bonds, to form an opinion on whether the bonds can be repaid by a stressed assessment of the generated cash flows.