(The following statement was released by the rating agency)
LONDON, July 02 (Fitch) Fitch Ratings has affirmed SNS Bank's
EUR4.4bn equivalent mortgage covered bonds at 'AA+' with
following an annual review of the programme.
KEY RATING DRIVERS
The rating is based on SNS Bank's Long-term Issuer Default
Rating (IDR) of
'BBB+', a Discontinuity Cap (D-Cap) of 4 (moderate risk) and an
(AP) of 72.8% which Fitch takes into account in its analysis.
Outlook on the bank's IDR and the fact that a potential
downgrade of the IDR may
not be entirely compensated by the assigned IDR uplift of '1'
Negative Outlook for the covered bonds rating.
Key rating drivers have remained largely unchanged since the
The 'AA+' breakeven AP has been lowered to 75.0% from 76.0%,
which is mainly due
to the revised refinancing spreads by Fitch which increased by
0.15% to 2.86% at
The 'AA+' break-even AP of 75.0% continues to be driven by the
mismatches between the assets and the covered bonds and by the
expected loss on
the assets. The weighted average life (WAL) of the bonds is four
years while the
WAL of the assets is 20 years.
Fitch calculated a weighted average (WA) foreclosure frequency
of 15.2%, a WA
recovery rate of 58.2% and WA expected loss of 6.4% in the 'AA+'
for the cover pool of Dutch residential mortgages. The cover
pool is well
seasoned (seven years) and has an indexed current loan-to-value
(LTV) of 87%.
The unchanged D-Cap of 4 continues to reflect what Fitch
assesses as moderate
risk for the asset segregation, liquidity gap and systemic risk,
pool-specific alternative management D-Cap components.
The 72.8% AP Fitch relies on supports a 'AA-' rating on the
covered bonds on a
probability of default basis and is sufficient to achieve
recoveries in excess
of 91% should the covered bonds default, supporting a two-notch
uplift to 'AA+'.
Fitch takes into consideration the highest AP of the past 12
months, as the
issuer's Short-term rating is 'F2'.
The 'AA+' rating would be vulnerable to downgrade if any of the
occurs: (i) the IDR is downgraded by two or more notches to
'BBB-' or below; or
(ii) the number of notches represented by the IDR uplift and the
reduced to 3 or lower; or (iii) the AP that Fitch considers in
increases above Fitch's 'AA+' breakeven level of 75.0%.
A potential downgrade of SNS Bank's IDR to the bank's current
of 'bbb-' would lead to a downgrade of the covered bonds to
'AA', all else being
The Fitch breakeven AP for the covered bond rating will be
others, by the profile of the cover assets relative to
bonds, which can change over time, even in the absence of new
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 SNS
Bank Covered Bonds full rating report, which will shortly be
Ieva Snejkova, CFA
+44 20 3530 1276
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
+44 20 3530 1564
+44 20 3530 1165
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 10
'Counterparty Criteria for Structured Finance and Covered
Bonds', dated 14 May
2014, 'Covered Bond Rating Criteria - Mortgage Liquidity and
Addendum' dated 4 February 2014, 'EMEA Residential Mortgage Loss
dated 28 May 2014, 'Criteria Addendum: Netherlands', dated 3
June 2014 are
available on www.fitchratings.com.
Applicable Criteria and Related Research:
Covered Bonds Rating Criteria
Counterparty Criteria for Structured Finance and Covered Bonds
Covered Bonds Rating Criteria - Mortgage Liquidity and Refinance
EMEA Residential Mortgage Loss Criteria
Criteria Addendum: Netherlands - Residential Mortgage Loss and
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