Fitch Ratings has upgraded Alpha Bank SA's (Alpha, B/Positive/B) covered bonds' rating to 'BBB-' from 'BB+'.

The Outlook is Positive.

The rating action follows the upgrade of Alpha's Issuer Default Rating (IDR, see 'Fitch Upgrades Alpha Bank to 'B'; Outlook Positive' dated 18 February 2022 at www.fitchratings.com).

KEY RATING DRIVERS

Following the upgrade of the bank's IDR, the resolution reference point (RRP) has been revised to 'BB-' (IDR plus two notches of resolution uplift), from 'B' previously, in line with Fitch's Covered Bonds Rating Criteria. Therefore, the 'BBB-' rating can be reached based on three notches of recovery uplift above the 'BB-' RRP, since Fitch's relied upon overcollateralisation (OC) of 27% is able to withstand cover pool credit losses associated with the 'BBB-' rating.

The Positive Outlook mirrors that on Alpha's IDR. If the bank is upgraded, the covered bonds' rating could be upgraded up to Greece's 'BBB+' country cap, provided that Fitch's relied upon OC can withstand stresses associated with the higher rating. The covered bonds could also be upgraded up to the 'BBB+' maximum achievable rating, in line with the Country Ceiling, if the relied upon OC supports timely payment up to a 'BB+' scenario and credit losses in a 'BBB+' scenario.

The breakeven asset percentage (AP) for the 'BBB-' rating has been revised to 90% (equivalent to 11.2% OC), reflecting the 'BBB-' credit loss Fitch derived from an updated analysis of the cover pool as of 31 December 2021. This is a change from the previous breakeven AP of 79% for the previous 'BB+' rating, which was based on a timely payment rating level of 'B+', and three notches of recovery uplift. The credit loss has increased to 11.2% from 5.2%, mainly due to the higher stresses applied at 'BBB-'.

Alpha's covered bonds have a resolution uplift of two notches, a payment continuity uplift (PCU) of six notches and a recovery uplift of three notches. The resolution uplift of two notches reflects that Greek legislative covered bonds are exempt from bail-in, that Alpha's Long-Term IDR is driven by its Viability Rating, and Fitch's view of the low risk of under-collateralisation at the point of resolution. The PCU of six notches results from Fitch's payment continuity assessment on the available protection for principal payment from the soft-bullet feature and for interest payments of at least three months. The full recovery uplift of three notches reflects the programme's timely payment rating level in the sub-investment-grade range and no identified material downside risk to recoveries.

Fitch relies on the issuer's 27% OC commitment, published in the programme's investor report. This constrains the rating as it can only support a rating up to 'BBB-', while the maximum achievable rating is 11 notches above the IDR, subject to a cap at Greece's Country Ceiling of 'BBB+'.

ESG

Alpha's has an ESG Relevance Score of '5' for Transaction Parties & Operational Risk because the rating is constrained by the relied upon OC. This has a negative impact on the credit profile, and is highly relevant to the rating, which is constrained at two notches below the 'BBB+' Country Ceiling for Greece.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Alpha's covered bonds could be upgraded up to the Country Ceiling, provided sufficient protection is available to withstand stresses associated with a higher rating. The programme could also be upgraded if Alpha's IDR was upgraded by one or two notches, provided that the available protection can cover stresses at higher rating levels.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Alpha's covered bonds would be vulnerable to a downgrade if the relied-upon AP rises above Fitch's 90% breakeven AP for the 'BBB-' covered bonds' rating.

Any downgrade would lead to a downgrade of the covered bonds' rating if sufficient protection is not available to withstand stresses associated with the 'BBB-' rating.

If the reference IDR goes below 'B-', in line with its Covered Bonds Rating Criteria, Fitch applies a floor in its covered bonds analysis as it believes that the switch of recourse to the cover pool is unlikely to occur upon a default on senior unsecured obligations. The floor will be set at the highest of one of the following: 'B-'; the IDR plus resolution uplift. No resolution uplift will be considered above the floor, but we would continue to apply the PCU of up to six unused notches and recovery uplift above the floor

Fitch's breakeven AP for the covered bonds' 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 breakeven AP to maintain the covered bonds' 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 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579

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.

RATING ACTIONS

Entity / Debt

Rating

Prior

Alpha Bank S.A.

senior secured, Mortgage Covered Bonds, Soft Bullet Bonds

LT

BBB-

Upgrade

BB+

Page

of 1

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.

APPLICABLE CRITERIA

Covered Bonds Rating Criteria (pub. 02 Jun 2021) (including rating assumption sensitivity)

Fitch's Covered Bonds Refinancing Spread Level (RSL) Assumptions - Supplementary Data File (pub. 02 Jun 2021)

Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 20 Sep 2021)

Structured Finance and Covered Bonds Country Risk Rating Criteria (pub. 28 Oct 2021)

Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 04 Nov 2021)

Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 04 Nov 2021)

Bank Rating Criteria (pub. 13 Nov 2021) (including rating assumption sensitivity)

European RMBS Rating Criteria (pub. 17 Dec 2021) (including rating assumption sensitivity)

APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

Covered Bonds Cash Flow Model, v2.0.2 (1)

ResiGlobal Model: Europe, v1.7.4 (1)

ADDITIONAL DISCLOSURES

Dodd-Frank Rating Information Disclosure Form

Solicitation Status

Endorsement Policy

ENDORSEMENT STATUS

Alpha Bank S.A. 	EU,UK Endorsed

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