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 of 95.0%, which provides more protection than Fitch's revised '
The Stable Outlook on the rating reflects the three-notch buffer against a downgrade of the issuer's IDR.
Uplifts
The resolution uplift remains unchanged at zero notches. There is no specific advanced resolution regime in
The PCU remains unchanged at six notches and reflects the strength of liquidity protection in the form of a 12-month extension period on the soft-bullet bonds and a 12-month pre-maturity test on the hard-bullet bonds. It also reflects the three-month interest protection in the form of a reserve that has been fully funded.
The recovery uplift on the rating is capped at one notch, as the programme is exposed to foreign-exchange risk from recoveries given default of the covered bonds. This is because the assets are denominated in Australian dollars while 99.6% of the covered bonds outstanding are denominated in other currencies. Swaps are in place on the liabilities, but we expect those swaps to terminate in the event of default of the covered bonds and in a recovery scenario.
Revised '
Fitch's '
The change in '
The credit loss component, which is the driver of the breakeven AP, reflects the credit quality of the underlying cover pool. This component is maintained from the previous analysis, at 3.1%.
Cover Pool Summary
The cover pool consisted of 112,843 loans secured by first-ranking mortgages on Australian residential properties, with a total outstanding balance of about AUD37.3 billion, as of
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The covered bond rating is at the highest level on Fitch's scale and cannot be upgraded.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
NAB's '
The breakeven AP will be affected, among other things, by the profile of the cover assets relative to the outstanding covered bonds, which can change over time, even in the absence of new issuance. Therefore, it cannot be assumed that the '
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 the 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 entity. 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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