(The following was released by the rating agency)
SYDNEY, February 03 (Fitch) Fitch Ratings has assigned
Commonwealth Bank of Australia's (CBA, 'AA-'/Stable/'F1+')
Series 25 EUR112m February 2029 mortgage covered bonds 'AAA'
ratings with a Stable Outlook.
This issue brings CBA's outstanding covered bonds to
AUD15.2bn. All bonds are guaranteed by Perpetual Corporate Trust
as trustee of the CBA Covered Bond Trust.
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 85%, which is below Fitch's breakeven
AP of 85.5%.
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 85.5%.
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 CBA's
IDR and recovery uplift, supports a 'AAA' rating on the covered
As of 30 November 2012, the cover pool consisted of 78,691
loans secured by first-ranking mortgages of Australian
residential properties with a total outstanding balance of
AUD18.5bn. The portfolio is wholly made up of full documentation
loans, which have a weighted average current loan-to-value ratio
of 59.7%, and a weighted average seasoning of 40.5 months.
Floating-rate loans comprise 89.4% of the cover pool. In a 'AAA'
scenario, Fitch has calculated a weighted average frequency of
foreclosure for the cover assets of 7%, and a weighted average
recovery rate of 39%. The cover pool is geographically
distributed across Australia's states, with the largest
concentrations being in New South Wales (38%) and Victoria
(36%). The agency's mortgage default analysis is based on its
Australian residential mortgage criteria.
The Fitch breakeven AP in line with the covered bond 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 time.