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Fitch Affirms Wuestenrot's Mortgage Pfandbriefe at 'AAA'; Stable Outlook
September 11, 2013 / 1:42 PM / 4 years ago

Fitch Affirms Wuestenrot's Mortgage Pfandbriefe at 'AAA'; Stable Outlook

(The following statement was released by the rating agency) LONDON, September 11 (Fitch) Fitch Ratings has affirmed Wuestenrot Bank AG Pfandbriefbank (WBP, BBB+/Stable/F2) mortgage Pfandbriefe at 'AAA' with a Stable Outlook. The affirmation follows the agency's periodic review of the programme. KEY RATING DRIVERS The ratings are based on WBP's Long-Term IDR of 'BBB+', the Discontinuity Cap (D-Cap) of 5 and the overcollateralisation (OC) that Fitch takes into account in its analysis and which is currently 15.6%. This level of OC supports a 'AA' rating on a probability of default (PD) basis and is sufficient to achieve outstanding recoveries in a 'AAA' scenario, supporting a two-notch recovery uplift to 'AAA' for the covered bonds rating. As of 30 June 2013, the cover pool had a significant initial open interest position as 30% of the covered bonds are floating compared with 0.5% of the cover assets. Consequently, the cover pool is sensitive to a rising interest rate scenario. No privileged derivatives are in place to mitigate the open position. WBP`s outstanding mortgage Pfandbriefe amounted to EUR3.8bn and were secured by a cover pool of EUR4.6bn. All liabilities and assets are euro-denominated. The mortgage pool comprises 62,585 loans, 96% of which are secured by residential properties and 4% by small commercial properties with an average lending value of EUR0.5m. As commercial loans are not part of WBP's strategic business activities, no new commercial loans will be added to the cover pool. The properties are well-diversified throughout Germany. Fitch applied a cash flow profile based on the assumption that loans are extended beyond interest reset dates, until their assumed final legal maturity. On the extended cash flow profile, Fitch calculated a weighted average remaining life of 15 years compared with four years for the delivered profile based on interest reset dates. In a 'AAA' scenario, Fitch has calculated an expected credit loss of 3.9%. The rating default rate and the rating recovery rate for this scenario are 16.4% and 76.5%, respectively. RATING SENSITIVITIES The 'AAA' rating is vulnerable to downgrade if any of the following occurred: (i) WBP's IDR was downgraded by one or more notches to 'BBB' or lower; or (ii) the D-Cap fell by one or more categories to 4 or lower; or (iii) the OC that Fitch considers in its analysis dropped below Fitch's 'AAA' breakeven OC of 11%. The prepayment scenarios applied in Fitch`s cash flow analysis are of paramount importance for the breakeven OC. Prepayments drive the available liquidity to repay outstanding bonds and therefore the level of asset sales needed. In a rising interest rate scenario, which is the most stressful scenario for WBP's mortgage Pfandbriefe, lower asset prices account for an increase in breakeven OC. In Fitch's view, 50% of our base prepayment assumption, which is 15% for loans with a seasoning of eight years, is an adequate stress in a low prepayment scenario under the assumption that all loans are extended until their final legal maturity. Contact Primary Analyst Mathias Pleissner Associate Director +69 768076 133 Fitch Deutschland GmbH Taunusanlage 17 D-60325 Frankfurt am Main Secondary Analyst Oliver Issl Associate Director +69 768076 122 Committee Chairperson Rebecca Holter Senior Director +69 768076 261 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: Additional information is available at Applicable criteria, 'Covered Bonds Rating Criteria' dated 04 September 2012, 'Covered Bonds Rating Criteria - Mortgage Liquidity and Refinance Stress Addendum' dated 03 June 2013, 'EMEA RMBS Master Rating Criteria' dated 06 June 2013, 'EMEA Criteria Addendum - Germany' dated 17 July 2013 are available at Applicable Criteria and Related Research: Covered Bonds Rating Criteria here Covered Bonds Rating Criteria - Mortgage Liquidity and Refinance Stress Addendum here EMEA RMBS Master Rating Criteria here EMEA Criteria Addendum - Germany - Mortgage and Cashflow Assumptions - Effective from 7 August 2012 – 17 July 2013 here Additional Disclosure Solicitation Status here 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 PUBLIC WEBSITE '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.

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