Fitch Rates CBA's Series 36 USD1.25bn Mortgage Covered Bonds 'AAA'; Outlook Stable

Wed Jun 18, 2014 11:56pm EDT

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(The following statement was released by the rating agency) SYDNEY, June 18 (Fitch) Fitch Ratings has assigned Commonwealth Bank of Australia's (CBA, AA-/Stable/F1+) Series 36 issue of USD1.25bn mortgage-covered bonds a rating of 'AAA'. The Outlook is Stable. The fixed rate bond is due in June 2019 and benefits from a 12-month extendable maturity. KEY RATING DRIVERS The rating is based on CBA's Long-Term Issuer Default Rating (IDR) of 'AA-', a Discontinuity Cap (D-Cap) of 2 (high), and an asset percentage (AP) of 89.5%, which is equivalent to Fitch's breakeven AP 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 CBA's IDR. Maturity mismatches are significant, with the weighted-average residual life of the cover assets at 15.3 years, and the liabilities at 5.1 years. RATING SENSITIVITIES The 'AAA' rating would be vulnerable to a downgrade if the issuer's Long-Term IDR were downgraded by two or more notches; the D-Cap fell by more than one category; or the programme's AP rose above the breakeven AP of 89.5%. Contacts: Primary Analyst Claire Heaton Director +61 2 8256 0361 Fitch Australia Pty Ltd., level 15, 77 King Street, Sydney NSW 2000 Secondary Analyst James Leung Director +852 2263 9912 Committee Chairperson Natasha Vojvodic Senior Director +61 2 8256 0350 The source of information used to assess these ratings was Commonwealth Bank of Australia. 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 0326, Email: Leni.Vu@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Covered Bonds Rating Criteria', dated 10 March 2014; 'Counterparty Criteria for Structured Finance and Covered Bonds', dated 14 May 2014; 'Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum', dated 14 May 2014 ; and 'APAC Residential Mortgage Criteria', dated 1 August 2013; 'APAC Residential Mortgage Criteria Addendum - Australia', dated 1 August 2013; 'Covered Bonds Rating Criteria - Mortgage Liquidity & Refinance Stress Addendum' dated 4 February 2014; 'Global Criteria for Lender's Mortgage Insurance in RMBS', dated 1 August 2013, are available at www.fitchratings.com. Applicable Criteria and Related Research: Covered Bonds Rating Criteria here Counterparty Criteria for Structured Finance and Covered Bonds here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum here APAC Residential Mortgage Criteria - Amended here Covered Bonds Rating Criteria - Mortgage Liquidity and Refinance Stress Addendum here Global Criteria for Lenders’ Mortgage Insurance in RMBS 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 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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