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Fitch Rates ANZ's USD1.25bn Covered Bonds 'AAA'/Stable
May 28, 2015 / 2:12 AM / 2 years ago

Fitch Rates ANZ's USD1.25bn Covered Bonds 'AAA'/Stable

(The following statement was released by the rating agency) SYDNEY, May 27 (Fitch) Fitch Ratings has assigned Australia and New Zealand Banking Group Limited's (ANZ, AA-/Stable/F1+) Series 2015-1 USD1.25bn mortgage covered bonds a rating of 'AAA'. The Outlook is Stable. This brings ANZ's total outstanding issuance to AUD18bn. The fixed rate bond is due in May 2020 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-', a Discontinuity Cap (D-Cap) of 2 (high), and an asset percentage (AP) of 87.0%, which provides a small buffer to Fitch's breakeven AP of 89.5%, supporting a tested rating of 'AA' on a probability of default (PD) basis, and a rating of 'AAA' after giving credit for recoveries. The Outlook on the covered bonds reflects the Stable Outlook on ANZ's IDR. The 'AAA' breakeven AP of 89.5%, corresponding to a breakeven overcollateralisation (OC) of 11.7%, is driven by an asset disposal loss component of 15.5% due to maturity mismatches and the refinancing assumptions applied to Australian residential mortgages, followed by the cover pool's credit loss of 4.2% in a 'AAA' scenario. The cash flow valuation component reduces the 'AAA' breakeven OC by 6.4% due to the excess spread available under the programme. RATING SENSITIVITIES The 'AAA' rating would be vulnerable to downgrade should any of the following occur: ANZ's IDR is downgraded by two notches; the D-Cap falls by more than one category; or the AP that Fitch takes into account in its analysis increased above the 'AAA' breakeven AP of 89.5%. Fitch's 'AAA' breakeven 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' breakeven AP to maintain the covered bond rating cannot be assumed to remain stable over time. In a deviation from its APAC Residential Mortgage Criteria, the agency used a delinquency multiple of 2x on the weighted average frequency of foreclosure at the tested rating on a probability of default basis. In its cash flow modelling of the asset cash flows, this multiple stresses the level of loans falling delinquent in the cover pool over a period of time, curing thereafter. Contact: Primary Analyst Sebastian Hebenstreit Analyst +61 2 8256 0360 Fitch Australia Pty Ltd., level 15, 77 King Street, Sydney NSW 2000, Australia Secondary Analyst James Leung Director +61 2 8256 0322 Committee Chairperson Claire Heaton Senior Director +61 2 8256 0361 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: Leni Vu, Sydney, Tel: +61 2 8256 0304, Email: Additional information is available at Applicable Criteria APAC Residential Mortgage Criteria (pub. 23 Jun 2014) here APAC Residential Mortgage Criteria Addendum – Australia (pub. 31 Dec 2014) 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. 08 Aug 2014) here Covered Bonds Rating Criteria – Mortgage Liquidity and Refinancing Stress Addendum (pub. 20 May 2015) here Additional Disclosures Solicitation Status here <a href=" =2&detail=31">Endorsement Policy 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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