Fitch Rates NAB's Series 22 Tranche 2 Covered Bonds 'AAA'; Stable Outlook

Thu Sep 4, 2014 12:15am EDT

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(The following statement was released by the rating agency) SYDNEY, September 04 (Fitch) Fitch Ratings has assigned National Australia Bank Limited's (NAB; AA-/Stable/F1+) Series 22 Tranche 2 EUR500m tap of the existing Series 22 EUR750m mortgage covered bonds a rating of 'AAA' with a Stable Outlook. This brings the total outstanding issuance on Series 22 to EUR1.25bn. The fixed-rate bond is due in May 2021 and benefits from a 12-month extendable maturity. KEY RATING DRIVERS The rating is based on NAB's Long-Term Issuer Default Rating (IDR) of 'AA-', a Discontinuity Cap (D-Cap) of 3 (high) and an asset percentage (AP) of 89.5%, which is equivalent to Fitch's breakeven AP for a 'AAA' rating, supporting a tested rating of 'AA' 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 NAB's IDR. As of 31 July 2014, the cover pool consisted of 61,767 loans secured by first-ranking mortgages of Australian residential properties with a total outstanding balance of AUD17.1bn. Maturity mismatches are significant, with the weighted-average residual life of the assets at 16.2 years and the liabilities at 6.0 years. RATING SENSITIVITIES The 'AAA' rating would be vulnerable to downgrade if any of the following occurred: NAB's IDR was downgraded by three notches; the D-Cap fell by more than two categories; or if the AP that Fitch takes into account in its analysis increased above the 'AAA' breakeven AP of 89.5%. Contacts: Primary Analyst James Leung Director +852 2263 9912 Fitch (Hong Kong) Limited 2801, Tower Two, Lippo Centre 89 Queensway Hong Kong Secondary Analyst Claire Heaton Director +61 2 8256 0361 Committee Chairperson Ben McCarthy Managing Director +61 2 8256 0388 The source of information used to assess these ratings was National Australia Bank 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 0326, Email: Leni.Vu@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Covered Bonds Rating Criteria', dated 8 August 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 23 June 2014; 'APAC Residential Mortgage Criteria Addendum - Australia', dated 23 June 2014; 'Covered Bonds Rating Criteria - Mortgage Liquidity & Refinance Stress Addendum' dated 4 February 2014; 'Global Criteria for Lender's Mortgage Insurance in RMBS', dated 23 June 2014, are available at www.fitchratings.com. Applicable Criteria and Related Research: Counterparty Criteria for Structured Finance and Covered Bonds here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum here APAC Residential Mortgage Criteria here APAC Residential Mortgage Criteria Addendum-Australia 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 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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