(The following statement was released by the rating agency)
FRANKFURT/LONDON, February 28 (Fitch) This announcement replaces
dated 13 February 2014, which incorrectly stated Commerzbank
covered bond programme's contractual overcollateralisation. The
change is not
material to the rating.
Fitch Ratings has affirmed Commerzbank AG's (CBK; A+/Stable/F1+)
covered bonds at 'AA' with a Stable Outlook, following a
periodic review of the
KEY RATING DRIVERS
The rating is based on CBK's Long-term Issuer Default Rating
(IDR) of 'A+', the
Discontinuity Cap (D-Cap) of 8 (minimal) and the contractual
overcollateralisation (OC) that Fitch takes into account in its
is currently 19%.
The unchanged D-Cap is driven by a minimal risk assessment of
the liquidity gap
& systemic risk component. The cover pool specific alternative
asset segregation risks are assessed as low. Risks stemming from
alternative management and privileged derivatives components are
The D-Cap analysis reflects the minimal risk of payment
discontinuation on the
covered bonds post CBK's insolvency. After CBK defaults, the
benefit from a switch to pass-through mechanism -if funds to
repay the bonds at
their expected maturity date are insufficient- and a separate
for each bond after a rating trigger breach.
Fitch's 'AA' breakeven OC has increased to 12.5% from 11.3%,
primarily driven by
the agency's newly implemented cash flow modelling approach. In
a 'AA' scenario,
Fitch has calculated a cumulative credit loss of 16.8%,
confirming last year's
However, the breakeven OC of 12.5% will only sustain the 'AA'
rating as long as CBK remains rated 'A+'. The level of OC
supporting the 'AA'
covered bond rating irrespective of CBK's IDR is currently
19.0%, which is in
line with the previous analysis.
With a cut-off date 31 December 2013, CBK's EUR500m outstanding
covered bonds were secured by a collateral pool of EUR605m,
resulting in nominal
OC of 21%. The collateral pool consists of 1,610 short-term
money market to
medium-term investment loans granted to 1,334 German SME
The weighted average life (WAL) of the collateral pool has
increased to 1.8 from
1.1 years since the previous analysis. However, Fitch has
modelled all loans
with an extended maturity to account for the increased default
short-term bullet loans should CBK be unwilling or unable to
loans. The agency assumed a minimum WAL of two years for all
Consequently, the portfolio's WAL for the credit model increased
to 2.5 years.
The covered bonds' redemption profile does not match the
amortisation of the
cover pool. The agency assumed a WAL of 2.5 years for the cover
the covered bonds have an expected bullet maturity in 4.2 years.
As a result,
temporary liquidity surpluses may arise, resulting in
significant negative carry
for the programme assuming a reinvestment rate of near zero.
All cover assets and the covered bonds are euro-denominated. The
predominantly carry floating rate interest (52%), while the
bonds pay a fixed coupon. Fitch has taken these mismatches into
modelling the expected cash flows under appropriate stresses, as
market risks are not mitigated by privileged derivatives.
However, a switch to
pass-through of the bonds would also change their coupon
payments from fixed to
floating, conditional on the cover assets having a longer term
outstanding liabilities at time of the switch, a significant
position could arise.
The 'AA' rating would be vulnerable to downgrade if any of the
occurred: (i) CBK's IDR was downgraded by nine or more notches
to 'B+' or below;
or (ii) the OC that Fitch considers in its analysis dropped
below Fitch's 'AA'
breakeven level of 12.5%.
The Fitch breakeven OC for the covered bond rating will be
affected by, among
other factors, the profile of the cover assets relative to
bonds, which can change over time, even in the absence of new
Therefore the breakeven OC for the covered bond rating cannot be
remain stable over time.
More details on the portfolio and Fitch's analysis will be
available in a credit
update, which will shortly be available at www.fitchratings.com.
+49 69 768076 126
Fitch Deutschland GmbH
D-60325 Frankfurt am Main
+49 69 768076 150
+49 69 768076 117
Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49
69 768076 232,
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Covered Bonds Rating Criteria', dated 4
'Counterparty Criteria for Structured Finance and Covered
Bonds', dated 13 May
2013 and â€˜Criteria for Rating European Granular Corporate
Securitisations (SME CLOs)â€™, dated 28 March 2013 are available
Applicable Criteria and Related Research:
Covered Bonds Rating Criteria
Counterparty Criteria for Structured Finance and Covered Bonds
Criteria for Rating Granular Corporate Balance-Sheet
Securitisations (SME CLOs)
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS
here. IN ADDITION,
ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE
FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
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
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH