BANCO COMERCIAL PORTUGUÊS, S.A. 
Fitch Ratings has upgraded
The Outlook is Stable.
The rating action follows the upgrade of BCP's Issuer Default Rating (IDR) to 'BB+' from 'BB' (see ' Fitch Upgrades Banco Comercial Portugues to 'BB+'; Outlook Stable' dated
KEY RATING DRIVERS
The covered bonds' 'A-' rating is based on BCP's 'BB+' Long-Term IDR, the various uplifts above the IDR granted to the programme and the overcollateralisation (OC) protection through the issuer's commitment.
Following the upgrade of the bank's IDR, the resolution reference point (RRP) has been revised to 'BBB' (IDR plus two notches of resolution uplift), from 'BBB-' previously, in line with Fitch's Covered Bonds Rating Criteria. Therefore, the 'A-' rating can be reached based on two notches of recovery uplift above the 'BBB' RRP, since Fitch's relied upon OC of 14% is able to withstand cover pool credit losses associated with the 'A-' rating.
The covered bonds are rated four notches above the bank's IDR, which is the maximum achievable uplift for the programme. It consists of a resolution uplift of two notches, a payment continuity uplift (PCU) of zero notches and a recovery uplift of two notches.
The breakeven over-collateralisation (OC) for the 'A-' rating has been revised to 2.0% from 5.0%, reflecting the 'A-' credit loss Fitch derived from its analysis of the cover pool. This is a change from the previous breakeven OC of 5.0% for the previous 'BBB+' rating. The credit loss decrease is due to Fitch's revised recovery rate assumptions to reflect smaller house price declines and foreclosure sales adjustment in
In its rating analysis, Fitch relies on the 14% OC commitment published in BCP's quarterly investor reports. This provides more protection than 2.0% of credit losses modelled in a stress scenario corresponding to the covered bonds' ratings.
Uplifts
The granted resolution uplift reflects the exemption from bail-in of BCP's fully collateralised OH, the low risk of under-collateralisation at the point of resolution and Fitch's view that a bank resolution will not result in the direct enforcement of recourse against the cover pool. Furthermore, BCP's OH two-notch resolution uplift takes into account that the bank's IDR is driven by its Viability Rating.
The zero-notch PCU reflects Fitch's view on the absence of a satisfactory liquidity protection mechanism to protect the covered bonds' timely interest payments in case of an enforcement of recourse against the cover pool. However, the programme benefits from principal liquidity protection provided by a 12-month maturity extension (soft bullet).
The programme is eligible for a recovery uplift of two notches as the OH timely payment rating level is in the investment-grade category. Also, Fitch has not identified any material downside risk to recovery expectations. All cover assets and covered bonds are euro-denominated.
The Stable Outlook on the covered bonds mirrors the Outlook on BCP's IDR.
BCP's OH have an ESG Relevance Score of '5' for Transaction Parties & Operational Risk, which reflects Fitch's view on interest payment interruption risk in case of an enforcement of recourse against the cover pool.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
BCP's OH rating could be upgraded up to Fitch's 'AA+' Country Ceiling for
Factors that could, individually or collectively, lead to negative rating action/downgrade:
BCP's OH rating would be downgraded if the bank's Long-Term IDR was downgraded by one notch or more, or the OC Fitch relies upon in its analysis decreases below Fitch's 'A-' break-even OC of 2.0%.
Fitch's break-even OC for the covered bond rating will be affected, among other factors, by the profile of the cover assets relative to outstanding covered bonds, which can change over time, even in the absence of new issuance. Therefore, the break-even OC to maintain the covered bond rating cannot be assumed to remain stable over time.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The programme ratings are linked to the issuing bank's IDR, as per Covered Bond Rating Criteria
ESG Considerations
BCP has an ESG Relevance Score of '5' for Transaction Parties & Operational Risk, which reflects Fitch's view on interest payment interruption risk in case of an enforcement of recourse against the cover pool.
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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