(The following statement was released by the rating agency)
SYDNEY, May 13 (Fitch) Fitch Ratings has assigned Australia and New Zealand
Banking Group Limited's (ANZ, AA-/Stable/F1+) Series 2013-2 issue of EUR1bn
mortgage covered bonds a 'AAA' rating with a Stable Outlook. The fixed-rate
bonds are due in May 2020 and benefit from a 12-month extendable maturity. This
brings the total issuance from ANZ's covered bond programme to AUD10.8bn.
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%, which
is lower than Fitch's breakeven AP of 87.3% for a 'AAA' rating, supporting a
'AA' rating on a probability of default (PD) basis and a 'AAA' rating after
giving credit for recoveries. The Outlook on the covered bonds reflects the
Stable Outlook on ANZ's IDR.
The driver of the D-Cap is the high risk assessment for liquidity gap and
systemic risk. This is principally driven by a weak pre-maturity test for the
programme's hard bullet maturity bonds that allows for a mandatory six-month
asset sale period prior to a scheduled hard bullet covered bond maturity, while
Fitch has assessed the time required to sell cover pool assets in Australia to
be at least 12 months. The D-Cap of 2, when combined with the institution's IDR
and recovery uplift, continues to support a 'AAA' rating on the covered bonds.
As of 2 April 2013, the cover pool consisted of 47,965 loans secured by
first-ranking mortgages of Australian residential properties with a total
outstanding balance of AUD13.4bn. The portfolio is wholly made up of full
documentation loans which have a weighted average current loan-to-value ratio of
63.8%, and a weighted average seasoning of 19.9 months. Floating-rate loans
comprise 92.4% and fixed-rate loans 7.6% of the cover pool by balance. The
mortgage portfolio is geographically distributed across Australia's states, with
the largest concentrations being in Victoria (33.6%) and New South Wales
In a 'AAA' scenario, Fitch has calculated a weighted average frequency of
foreclosure for the cover assets of 9%, and a weighted average recovery rate of
53.1%. The agency's mortgage default analysis is based on its Australian
residential mortgage criteria
Maturity mismatches are significant, with the weighted-average residual life of
the assets at 16.5 years and of the liabilities at 4.3 years.
Key Rating Sensitivities
The 'AAA' rating would be vulnerable to a downgrade if the issuer's Long-Term
IDR is downgraded by two or more notches; if the D-Cap falls by more than one
category; or if the programme's AP rises above the breakeven AP of 87.3%.
+61 2 8256 0361
Fitch Australia Pty Ltd.
Level 15, 77 King Street, Sydney NSW 2000
+61 2 8256 0322
+61 2 8256 0388
Media Relations: Iselle Gonzalez, Sydney, Tel: +61 2 8256 0326, Email:
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
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Covered Bonds Rating Criteria', dated 10 September 2012;
'Covered Bonds Counterparty Criteria', dated 25 July 2012; and 'APAC Residential
Mortgage Criteria', dated 3 August 2012; 'APAC Residential Mortgage Criteria
Addendum - Australia', dated 3 August 2012; 'Covered Bonds Rating Criteria -
Mortgage Liquidity & Refinance Stress Addendum' dated 14 November 2012; 'Global
Criteria for Lender's Mortgage Insurance in RMBS', dated 7 September 2012, are
available at www.fitchratings.com.
Applicable Criteria and Related Research
Covered Bonds Counterparty Criteria
Covered Bonds Rating Criteria - Amended
Covered Bonds Rating Criteria - Mortgage Liquidity & Refinance Stress Addendum
APAC Residential Mortgage Criteria
APAC Residential Mortgage Criteria Addendum ?????? Australia
Global Criteria for Lenders?????? Mortgage Insurance in RMBS
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