Fitch Ratings has affirmed
The Outlook is Stable.
Cross-border covered bonds have been issued through
The affirmation follows a periodic review of the covered bond programme.
KEY RATING DRIVERS
The rating on the mortgage covered bonds is based on BNZ's Long-Term Issuer Default Rating (IDR) of 'A+', the various uplifts above the IDR granted to the programme, and the overcollateralisation (OC) protection provided through the programme's asset percentage (AP).
The covered bonds are rated four notches above the bank's IDR. 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 highest nominal AP in the last 12 months of 83.0%. This provides more protection than Fitch's unchanged '
The Stable Outlook reflects a three-notch buffer against an IDR downgrade.
Uplifts
The resolution uplift remains unchanged at zero notches.
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. It also reflects the interest protection in the form of a reserve fund covering three months of interest payments and one-quarter of annual senior fees. At the date of the analysis, the reserve has not been fully funded. BNZ has confirmed to Fitch that the reserve will be fully funded at the next payment date. The documented trigger to fund the reserve (F1+) is higher than the minimum threshold in our criteria - the loss of 'A-' and 'F1' ratings.
The recovery uplift on the rating is capped at one notch, as the programme is significantly exposed to foreign-exchange risk that could affect recoveries in the case of a default of the covered bonds. There are swaps in place on the liabilities, but we expect these swaps to terminate upon a covered bond default. This would mean the longer-dated
'
Fitch's unchanged '
Cover Pool Summary
The cover pool consisted of 38,877 loans as of
The key rating drivers listed in the applicable sector criteria, but not mentioned above, are not material to this rating action.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The rating on the covered bonds is at the highest level on Fitch's rating scale and cannot be upgraded.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The covered bond rating would be vulnerable to a downgrade if the bank's IDR were downgraded by four or more notches to 'BBB' or below, or if the relied-upon AP provided less protection than Fitch's '
There is no rating impact on the rating of the bonds even if the relied-upon AP in the programme equals the maximum 97.0% contractual AP stipulated in the programme documents, as it supports a greater level of OC than Fitch'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.
The principal sources of information used in the analysis are described in the Applicable Criteria.
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 entity, 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.
(C) 2023 Electronic News Publishing, source