Fitch Ratings has affirmed
The Outlook is Stable. The covered bonds were issued through
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 highest nominal AP in the past 12 months (78.5%), which provides more protection than our 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.
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 three-month interest protection in the form of a reserve that was fully funded when ASB's Short-Term IDR was downgraded below 'F1+'.
The recovery uplift is capped at one notch and is based on the programme's exposure to foreign-exchange risk from recoveries in a default of the covered bonds, as the outstanding covered bonds are denominated in euros while the cover assets are in
Fitch's '
The credit loss component reflects the credit quality of the underlying cover pool. This component remains unchanged since the previous analysis, at 3.3%.
Cover Pool Summary
The cover pool consisted of 27,752 loans secured by first-ranking mortgages on
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 '
Factors that could, individually or collectively, lead to negative rating action/downgrade:
ASB's '
Fitch's '
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
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
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This 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 entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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