Fitch Ratings has affirmed
The Outlook is Stable.
This follows a periodic review of the covered bond programme.
KEY RATING DRIVERS
The '
The covered bonds are rated four notches above the bank's IDR, at the highest end of the rating scale. This is out of a maximum achievable uplift of seven notches, consisting of a resolution uplift of zero notches, a payment continuity uplift (PCU) of six notches and a recovery uplift of one notch. Fitch's analysis relies on the programme's committed AP used in the programme's asset coverage test (ACT), which is 95.0%.
The Stable Outlook on the rating reflects the three-notch buffer against a downgrade of the issuer's IDR.
Uplifts
The PCU remains unchanged at six notches and reflects the strength of liquidity protection in place in the form of a 12-month pre-maturity test on the hard-bullet bonds, which have a cure period of six months, and the 12-month extension period on the soft-bullet bonds, which make up the bulk of the issuance. The issued hard-bullet bonds have less liquidity protection due to the six-month cure period, but Fitch believes it is unlikely they will cause a cross-default due to the size and distribution of the remaining hard-bullet bonds. They form a relatively small proportion of the liability profile and continue to reduce as a result of maturity and further soft-bullet issuance. The PCU also reflects the three-month interest protection in the form of a reserve that has been fully funded as of the last payment date.
The recovery uplift on the rating is capped at one notch, as the programme is exposed to foreign-exchange risk from recoveries in a default of the covered bonds, which lowers recovery expectation. This is because the longer-dated assets are denominated in Australian dollars while 98.5% of the covered bonds outstanding are denominated in other currencies. Swaps are in place on the liabilities, but we expect these swaps to terminate in a recovery scenario.
'
Fitch's '
The ALM loss component has worsened slightly to 0.5%, from 0.2%, mainly due to a lower modelled variable-rate asset margin over the bank bill swap rate.
The credit loss component of 2.8% is the largest component of the '
Cover Pool Summary
The cover pool consisted of 147,000 loans secured by first-ranking mortgages on Australian residential properties, with a total outstanding balance of about AUD35.6 billion at
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The rating on the covered bond is '
Factors that could, individually or collectively, lead to negative rating action/downgrade:
CBA's '
Fitch's '
SOURCES OF INFORMATION
The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated bonds is public.
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 covered bond rating is driven by the credit risk of the issuing financial institution, as measured by its Long-Term IDR.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the programme, either due to their nature or the way in which they are being managed by the programme. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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