TEXT - Fitch may still cut Banco Santander Totta covered bond rating

Mon Dec 17, 2012 9:52am EST

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(The following statement was released by the rating agency)

Dec 17 - Fitch Ratings has maintained Banco Santander Totta's (Totta; 'BBB-'/Negative) Portuguese mortgage covered bonds ('Obrigacoes Hipotecarias'; OH) 'BBB' rating on Rating Watch Negative (RWN). Fitch placed Totta's covered bonds on RWN earlier this year to reflect the recalculation of the agency's breakeven overcollateralisation (OC) pending the application of its updated residential mortgage loss criteria and refinancing cost assumptions to the programme (see 'Fitch Downgrades Banco Popular Portugal and Banco Santander Totta Covered Bonds' dated 20 June 2012). The RWN will be resolved once Fitch completes its analysis considering loan-level data on the current cover pool composition provided by the issuer. The review of the programme is expected to be finalised within the next three months. The programme has a D-Cap of 0, equalising the covered bond ratings on a probability of default (PD) basis with Totta's Issuer Default Rating. The current 'BBB' rating reflects a one-notch uplift for recoveries in excess of 51% on the longer dated covered bonds given the minimum level of OC required by the Portuguese covered bond legislation (5.26%) which Fitch takes into account in its analysis. (Caryn Trokie, New York Ratings Unit)

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