RPT-Fitch Places NBG Programme I Covered Bonds on Rating Watch Positive

Fri May 30, 2014 7:06am EDT

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May 30 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has placed National Bank of Greece S.A.'s (NBG, B-/Stable/B; Viability Rating: b-) Programme I mortgage covered bonds' 'B+' rating on Rating Watch Positive (RWP).

The rating action follows the upgrade of Greece's Sovereign Long-term Issuer Default Rating (IDR) to 'B' and the increase of the Country Ceiling to 'BB' (see 'Fitch Upgrades Greece to 'B'; Outlook Stable' dated 23 May 2014 at www.fitchratings.com). Fitch has placed the rating of NBG Programme I, currently at the 'B+' Structured Finance (SF) rating cap, on RWP as it is reviewing this cap. Depending upon the outcome of the review, the covered bonds could be upgraded to a maximum rating of 'BB', provided that the programme's asset percentage (AP) is lower than the breakeven AP for that rating level.

The potential upgrade up to 'BB' also takes into account the IDR uplift that Fitch has assigned to NBG Programme I due to the issuer's large size in the domestic market and its interconnectedness with the country (see 'Fitch Revises Outlook on Greek CVBs; Maintains Cypriot CVB on RWN on Criteria Amendments' dated 1 April 2014 at www.fitchratings.com).

KEY RATING DRIVERS

In line with Fitch's 'Criteria for Sovereign Risk in Developed Markets for Structured Finance and Covered Bonds', SF and covered bond ratings are constrained at the lower of the Country Ceiling and the SF rating cap. The Country Ceiling has been increased and Fitch is reviewing the SF rating cap based upon the updated macroeconomic outlook.

The Programme I mortgage covered bonds' rating is based on NBG's IDR of 'B-', an IDR uplift of '1', an unchanged Discontinuity Cap (D-Cap) of '0' (full discontinuity risk) and the 55% AP that Fitch takes into account in its analysis and published by the issuer in the investor report. This level of AP provides more protection than the 75% breakeven AP for a 'B+' rating, and would allow the covered bonds to achieve a three-notch uplift based on the recovery prospects on the covered bonds assumed to be in default being in excess of 91%.

RATING SENSITIVITIES

Further changes to Greece's Country Ceiling or SF rating cap may result in corresponding changes to NBG Programme I's rating.

NBG Programme I's rating would be vulnerable to downgrade if any of the following occurred: (i) NBG's IDR was downgraded by two or more notches; (ii) the programme AP went above Fitch's 'B+' breakeven AP of 75%.

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