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Fitch Rates ANZ's Series 2016-2 GBP500m Covered Bonds 'AAA'; Outlook Stable
February 12, 2016 / 12:11 AM / in 2 years

Fitch Rates ANZ's Series 2016-2 GBP500m Covered Bonds 'AAA'; Outlook Stable

(The following statement was released by the rating agency) SYDNEY, February 11 (Fitch) Fitch Ratings has assigned Australia and New Zealand Banking Group Limited's (ANZ, AA-/Stable/F1+) Series 2016-2 mortgage covered bonds a rating of 'AAA'. The Outlook is Stable. This brings the total outstanding issuance to AUD16.5bn. The floating-rate bond is due in February 2019, and benefits from a 12-month extendable maturity. KEY RATING DRIVERS The rating is based on ANZ's Long-Term Issuer Default Rating (IDR) of 'AA-', an unchanged Discontinuity Cap (D-Cap) of 3 notches, and the asset percentage (AP) of 87.0% used in the programme's asset coverage test - which is lower than Fitch's 'AAA' break-even AP of 89.5%. These factors support a 'AA' tested rating on a probability-of-default (PD) basis, and a 'AAA' rating after giving credit for recoveries given default of the covered bonds. The Outlook on the covered bonds reflects the Stable Outlook on ANZ's IDR. The 89.5% 'AAA' break-even AP corresponds to a break-even over-collateralisation (OC) of 11.7%. The asset-disposal loss component of 14.4% remains the main driver, due to significant maturity mismatches between the cover pool and covered bonds (cover assets at 16.1 years versus liabilities at 4.4 years) and the refinancing assumptions applied to Australian residential mortgages. This is followed by the cover pool's credit loss component of 4.2%. Credit given to excess spread under the cash flow valuation component reduced the 'AAA' break-even OC by 5.7%. RATING SENSITIVITIES The 'AAA' rating would be vulnerable to a downgrade if any of the following were to occur: (i) ANZ's IDR were to be downgraded by three notches to 'A-'; (ii) the Discontinuity Cap were to fall by three notches to 0 (full discontinuity); or (iii) the asset percentage (AP) that Fitch takes into account in its analysis were to rise above Fitch's 'AAA' break-even AP of 89.5%. Fitch's 'AAA' break-even 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 the 'AAA' break-even AP to maintain the covered bond rating cannot be assumed to remain stable over time. Contact: Primary Analyst Claire Heaton Senior Director +61 2 8256 0361 Fitch Australia Pty Ltd. Level 15, 77 King St, Sydney NSW 2000 Secondary Analyst James Leung Director +61 2 8256 0322 Committee Chairperson Ben McCarthy Managing Director +61 2 8256 0388 Date of relevant committee: 12 November 2015 The source of information used to assess these ratings was Australia and New Zealand Banking Group Limited. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated bonds is public. Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email:; Leni Vu, Sydney, Tel: +61 2 8256 0304, Email:; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on Applicable Criteria APAC Residential Mortgage Criteria (pub. 23 Jun 2015) here Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014) here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014) here Covered Bonds Rating Criteria (pub. 23 Jul 2015) 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. 07 Sep 2015) here Global Structured Finance Rating Criteria (pub. 06 Jul 2015) here Additional Disclosures 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 FREE 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. Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises 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.

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