May 27, 2014 / 8:57 AM / 3 years ago

RPT-Fitch Rates CBA's Series 35 AUD125m Mortgage Covered Bonds 'AAA'; Outlook Stable

(Repeat for additional subscribers)

May 27 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned Commonwealth Bank of Australia's (CBA, AA-/Stable/F1+) Series 35 issue of AUD125m mortgage-covered bonds a rating of 'AAA'. The Outlook is Stable. The fixed-rate bond is due in May 2024 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 15.4 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%.

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