Fitch Revises SNS Bank Covered Bonds' Outlook to Stable, Affirms at 'AA+'

Fri Aug 1, 2014 5:26am EDT

(The following statement was released by the rating agency) LONDON, August 01 (Fitch) Fitch Ratings has revised the Outlook of SNS Bank N.V.'s (SNS, BBB+/Negative/F2) EUR4.4bn equivalent mortgage covered bonds to Stable from Negative and affirmed their rating at 'AA+'. The Outlook revision reflects an increase in the IDR uplift to '2' from '1'. This follows the classification of SNS as systemically important by the Dutch Central Bank (DNB) because of its interconnectedness within the financial system and its market share in savings and mortgages in The Netherlands. The IDR uplift reflects Fitch's view on the greater motivation for alternative resolution tools to be applied to SNS other than liquidation and the level of senior unsecured debt to total adjusted assets in excess of 5% in place, providing a buffer for covered bondholders should equity and junior instruments prove insufficient to absorb losses. The Stable Outlook on the covered bonds is despite the Negative Outlook on SNS's IDR. This is because Fitch expects the IDR uplift of '2' on the programme to offset a potential downgrade of SNS's IDR to its current Viability Rating of 'bbb-' as a result of a weakening of state support. KEY RATING DRIVERS The key rating drivers remain unchanged since the programme's review on 2 July 2014. The rating is based on SNS Bank's Long-term Issuer Default Rating (IDR) of 'BBB+', the increased IDR uplift of '2', a Discontinuity Cap (D-Cap) of 4 (moderate risk) and an asset percentage (AP) of 75% that the issuer commits to in the asset coverage test in its investor report, the same level as the 'AA+' breakeven AP. RATING SENSITIVITIES The 'AA+' rating would be vulnerable to downgrade if any of the following occurs: (i) the IDR is downgraded by three or more notches to 'BB+' or below; or (ii) the number of notches represented by the IDR uplift and the D-Cap is reduced to 5 or lower; or (iii) the AP that Fitch considers in its analysis increases above Fitch's 'AA+' breakeven level of 75%. The Fitch breakeven AP for the covered bond rating will be affected, amongst 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 breakeven AP to maintain the covered bond rating cannot be assumed to remain stable over time. More details on the portfolio and Fitch's analysis will be available in a full rating report, which will shortly be available at Contacts: Primary Analyst Kevin Vanistendael Analyst +44 20 3530 1564 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Stephen Kemmy Director +44 20 3530 1474 Committee Chairperson Cosme de Montpellier Senior Director +44 20 3530 1407 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: Additional information is available on Applicable criteria, 'Covered Bonds Rating Criteria', dated 10 March 2014, 'Counterparty Criteria for Structured Finance and Covered Bonds', dated 14 May 2014, 'Covered Bond Rating Criteria - Mortgage Liquidity and Refinance Stress Addendum' dated 4 February 2014, 'EMEA Residential Mortgage Loss Criteria', dated 28 May 2014, 'Criteria Addendum: Netherlands', dated 3 June 2014 are available on Applicable Criteria and Related Research: Covered Bonds Rating Criteria here Counterparty Criteria for Structured Finance and Covered Bonds here Covered Bonds Rating Criteria - Mortgage Liquidity and Refinance Stress Addendum here EMEA Residential Mortgage Loss Criteria here Criteria Addendum: Netherlands - Residential Mortgage Loss and Cash Flow Assumptions 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.