October 6, 2016 / 6:21 AM / 9 months ago

Fitch Affirms NAB's Mortgage Covered Bonds at 'AAA'; Outlook Stable

13 Min Read

(The following statement was released by the rating agency) SYDNEY, October 06 (Fitch) Fitch Ratings has affirmed National Australia Bank's (NAB, AA-/Stable/F1+) AUD20.3bn of outstanding mortgage covered bonds at 'AAA'. The Outlook is Stable. The rating action follows the addition of 12-month extendible maturities (soft bullet) to NAB's outstanding benchmark covered bonds after bondholders' consent. The conversion of these bonds, which were originally issued as hard bullet, brings the total amount of soft-bullet bonds to 83.5% of the outstanding covered bonds' balance. The remaining hard-bullet series have scheduled maturity dates up to January 2028. KEY RATING DRIVERS The rating is based on NAB's Long-Term Issuer Default Rating (IDR) of 'AA-', an unchanged Discontinuity Cap of 4 notches and the asset percentage (AP) that Fitch relies on in its analysis being the AP used in the programme's asset coverage test at 90%. This provides more protection than Fitch's 'AAA' breakeven AP of 91.5%. The Outlook on the covered bonds reflects the Stable Outlook on NAB's IDR. The 'AAA' breakeven AP of 91.5% corresponds to a breakeven overcollateralisation (OC) of 9.3%, which is lower than the 11.1% published in March 2016. The change is due to the improvement of the programme's asset and liability mismatches as a result of the hard-bullet bonds considered under the solicitation for consent being converted to soft-bullet with a 12-month extendible maturity. This change reduced the asset disposal loss component to 12.2% from 14.4%. The credit loss component increased to 4% from 3.8% due to higher overall credit risk of the cover pool, which was mainly due to a higher proportion of investment and interest-only loans being included in the cover pool since our last analysis. The stressed cash flow valuation component reduces the 'AAA' breakeven OC by 5.4%, a lower positive effect than previously, primarily due to Fitch's updated prepayment assumptions for Australia that reduce the excess spread modelled for the programme. The breakeven AP considers whether timely payments are met in an 'AA' scenario and tests for recoveries given default of at least 91% in an 'AAA' scenario. As of end-August 2016, the cover pool consisted of 95,037 loans secured by first-ranking mortgages of Australian residential properties with a total outstanding balance of AUD29.2bn. The cover pool's weighted-average loan-to-value ratio was 57.6% and the weighted-average seasoning of the loans was 33.4 months. Investment loans formed 32.1% of the pool while 29.1% of the pool was interest-only loans. The cover pool is geographically diversified across Australia, with the largest concentrations in New South Wales (41.2%) and Victoria (28.2%). RATING SENSITIVITIES The 'AAA' rating would be vulnerable to a downgrade should any of the following occur: National Australia Bank's IDR is downgraded by four notches; the Discontinuity Cap falls by four notches; or the AP that Fitch takes into account in its analysis rises above the 'AAA' breakeven AP of 91.5%. Fitch's 'AAA' breakeven AP for the covered bond rating will be affected, among others, 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, it cannot be assumed that the 'AAA' breakeven AP, which maintains the covered bond rating, will remain stable over time. Contact: Primary Analyst Sambit Agasti Analyst +61 2 8256 0337 Fitch Australia Pty Ltd. Level 15, 77 King Street, Sydney NSW 2000 Secondary Analyst Claire Heaton Senior Director +61 2 8256 0361 Committee Chairperson Natasha Vojvodic Senior Director +61 2 8256 0350 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. The source of information used to assess these ratings was National Australia Bank. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated bonds is public. Additional information is available on www.fitchratings.com Applicable Criteria APAC Residential Mortgage Criteria (pub. 30 Aug 2016) here Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016) here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 18 Jul 2016) here Covered Bonds Rating Criteria (pub. 11 Mar 2016) here Covered Bonds Rating Criteria - Mortgage Liquidity and Refinancing Stress Addendum (pub. 23 Sep 2015) here Fitch's Mortgage Covered Bond Refinancing Stresses - Excel File (pub. 12 Feb 2016) here Global Bank Rating Criteria (pub. 15 Jul 2016) here Global Criteria for Lenders' Mortgage Insurance in RMBS (pub. 28 Jul 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1012723 Solicitation Status here Endorsement Policy here ail=31 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below