(The following was released by the rating agency)
SYDNEY, February 04 (Fitch) Fitch Ratings has assigned
Australia & New Zealand Banking Group's (ANZ,
'AA-'/Stable/'F1+') GBP500m Series 2013-1 mortgage covered bonds
'AAA' ratings with a Stable Outlook.
The rating is based on ANZ's Long-Term Issuer Default Rating
(IDR) of 'AA-', a Discontinuity Cap (D-Cap) of 2 (high) and an
asset percentage (AP) of 86%, which is below Fitch's breakeven
AP of 87.3%.
This issue brings ANZ's outstanding covered bonds to
AUD9.5bn. All bonds are guaranteed by Perpetual Corporate Trust
Limited as trustee of the ANZ Residential Covered Bond Trust.
Sensitivity / Rating Drivers
The 'AAA' rating would be vulnerable to a downgrade if the
issuer's Long-Term IDR is downgraded by two or more notches; if
the D-Cap falls by more than one category; or if the AP level
Fitch takes into account in its analysis rises above the
breakeven point of 87.3%.
The driver of the D-Cap is Fitch's assessment of high
liquidity gap and systemic risk. This is principally driven by
programme documentation which provides, in certain
circumstances, for a six-month period, prior to a scheduled
covered bond maturity, for cover pool asset sales, while Fitch
has assessed the time required to sell cover pool assets in
Australia as 12 months. The D-Cap of 2, when combined with ANZ's
IDR and recovery uplift, supports a 'AAA' rating on the covered
As of 31 December 2012, the cover pool consisted of 46,151
loans secured by first ranking mortgages of Australian
residential properties with a total outstanding balance of
AUD13bn. The portfolio is wholly made up of full documentation
loans which have a weighted average current loan-to-value ratio
of 64.1%, and a weighted average seasoning of 18.1 months.
Floating-rate loans represent 92.8% of the cover pool. In a
'AAA' scenario, Fitch has calculated a weighted average
frequency of foreclosure for the cover assets of 9%, and a
weighted average recovery rate of 46.9%. The cover pool is
geographically distributed across Australia's states, with the
largest concentrations being in New South Wales/ Australian
Capital Territory (28.9%), Victoria (33.6%), and Queensland
(15.3%). The agency's mortgage default analysis is based on its
Australian residential mortgage criteria.
The breakeven AP supports a 'AA+' rating on a probability of
default basis and an uplift to 'AAA' based on stressed
recoveries of at least 91% on the underlying collateral. The
breakeven AP for the rating will be affected, among 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 it cannot be assumed to remain stable over