This report does not constitute a rating action.
European covered bond issuance could slow down if improved banking performance leads to tighter spreads on unsecured funding. Any future sovereign rating actions--positive and negative--could also have implications for covered bond ratings and issuance.
What's Happening
In the first half of 2025, we took a series of positive rating actions on European banks (see "Related Research").
Banks in Southern Europe have seen rising profitability, along with improved operating and funding conditions. We therefore took positive actions on a significant number of banks, including Intesa Sanpaolo SpA (Italy), Banco Santander Totta S.A, (Portugal), and Abanca Corporacion Bancaria S.A (Spain). We also upgraded banks in Germany (DekaBank) and Iceland (Landsbankinn hf.), despite ongoing economic uncertainty.
Italy was upgraded to 'BBB+/Stable,' and our outlook on Belgium was revised to negative. Both of these actions carried implications for related covered bond ratings (see "Related Research").
Why It Matters
While the bank rating actions have not had a direct effect on our ratings on related covered bond programs, they provide further support through additional unused notches of uplift, the number of notches the issuer credit rating can be lowered by, without resulting in a downgrade of the covered bonds, all else being equal, or buffer where the bank acts as counterparty in the program.
Our rating actions on southern European banks increase the potential for additional uplift on their corresponding covered bond ratings. However, the sovereign rating remains a limiting factor. The table shows the maximum achievable covered bond rating for programs in Portugal, Spain, Italy, and Greece, along with Belgium and France, in line with our rating above the sovereign criteria.
| Sovereigns and maximum achievable covered bond ratings | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Country | Sovereign credit rating | Maximum achievable mortgage covered bond rating | Maximum achievable public sector covered bond rating* | Next sovereign review | ||||||
| France | AA-/Negative | AAA/Stable | AA+/Negative | Nov. 28, 2025 | ||||||
| Belgium | AA/Negative | AAA/Stable | AAA/Negative | Oct. 24, 2025 | ||||||
| Portugal | A/Positive | AAA/Stable§ | N/A | Aug. 29, 2025 | ||||||
| Spain | A/Stable | AAA/Stable§ | AA-/Stable | Sept. 12, 2025 | ||||||
| Italy | BBB+/Stable | AA/Stable§ | N/A | Oct. 10, 2025 | ||||||
| Greece | BBB/Stable | AA-/Stable§ | N/A | Oct. 17, 2025 | ||||||
| *Single jurisdiction cover pool. Multi jurisdiction cover pools considered case by case. §Structural coverage of refinancing needs over a 12-month period. Not considering conditional pass-through covered bonds. N/A--Countries with no or few outstanding public sector covered bonds. | ||||||||||
What Comes Next
Further positive rating actions on banks could reduce the cost of unsecured funding. All else being equal, this may reduce the attractiveness of covered bond funding as senior unsecured funding may become cheaper.
If there are further sovereign rating actions in the year, these may have subsequent repercussions for covered bond issuance. Downward sovereign pressure could widen covered bond spreads to attract investors focused on higher-rated debt. If spreads further increase relative to unsecured funding, covered bond issuance will likely be lower than expected.
The outlook for southern European sovereigns remains stable, while both Belgium and France have negative outlooks. We may take further rating actions on covered bond programs exposed to these sovereigns, such as Belfius Bank and GE SCF, should sovereign creditworthiness deteriorate further.
Conversely, if the creditworthiness of southern European sovereigns improves, it could lead to positive rating actions on related covered bond ratings. As an example, in April we raised our ratings on UniCredit SpA's mortgage covered bonds following our upgrade of Italy.
The covered bond ratings may be affected by proposed changes to our covered bond criteria, which are currently under review. Until the review is complete, we will continue to use our existing criteria to rate and surveil covered bonds.
Related Criteria And Research
- UniCredit SpA Italian Mortgage Covered Bond Ratings Raised Following Sovereign Action; Outlook Stable , April 29, 2025
- Belfius Bank SA/NV Public Sector Covered Bonds Outlook Revised To Negative; 'AAA' Ratings Affirmed, May 12, 2025
- GE SCF S.C.A. Covered Bonds Outlook Revised To Negative; 'AA' Ratings Affirmed , May 9, 2025
- Iceland-Based Landsbankinn hf. Upgraded To 'A-' On Additional Loss-Absorbing Capacity; Outlook Stable, April 28, 2025Iceland-Based Landsbankinn hf. Upgraded To 'A-' On Additional Loss-Absorbing Capacity; Outlook Stable, April 28, 2025
- DekaBank Deutsche Girozentrale Upgraded To 'A+' On Improved Group Resilience Capacity; Outlook Stable, April 17, 2025
- Outlooks On Six Spanish Banks Revised To Positive On Stronger Profitability, April 29, 2024
- Various Rating Actions Taken On 15 Italian Banks On Sovereign Upgrade And More Resilient Industry Dynamics, April 18, 2025
- Various Rating Actions Taken On Four Portuguese Banks On Sovereign Upgrade And Easing Economic Risks, April 18, 2025
- Various Positive Rating Actions Taken On Greek Banks On Stronger Institutional Framework And Improving Capital Quality, Jan. 31, 2025
- Calendar Of 2025 EMEA Sovereign, Regional, And Local Government Rating Publication Dates, Dec. 19, 2024
- Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
- Request For Comment: Methodology For Rating Covered Bonds, April 3, 2025
- Glossary Of Covered Bond Terms, April 27, 2018
| Primary Contact: | Casper R Andersen, Frankfurt 49-69-33-999-208; casper.andersen@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.