(The following was released by the rating agency)
SYDNEY, December 14 (Fitch) Fitch Ratings has assigned
National Australia Bank's (NAB, 'AA-'/Stable/'F1+') Series 10
EUR1bn mortgage covered bonds 'AAA' ratings. The Outlook is
Stable. This issue brings NAB's outstanding covered bonds to
All bonds are guaranteed by Perpetual Corporate Trust as
trustee of the NAB Covered Bond Trust.
The rating is based on NAB's Long-term Issuer Default
Rating (IDR) of 'AA-', a Discontinuity Cap (D-Cap) of 3
(moderate high) and an asset percentage (AP) of 87.0%, which is
equivalent to Fitch's breakeven AP for a 'AAA' rating.
The 'AAA' rating would be vulnerable to a downgrade if the
IDR is downgraded by three or more notches; if the
Discontinuity-Cap (D-Cap) falls by more than two categories; or
if the programme's AP rises above 87.0%.
The driver of the D-Cap is the moderate high risk assessment
for liquidity gap and systemic risk. This is principally driven
by programme documentation which provides, in certain
circumstances, for a 12-month period prior to a scheduled
covered bond maturity for cover pool asset sales.
This provision is equivalent to Fitch's assessment of the
time required to sell cover pool assets in Australia at 12
months. The D-Cap of 3, when combined with NAB's IDR and
recovery uplift, supports a 'AAA' rating on the covered bonds.
As of 2 November 2012, the cover pool consisted of 36,393 loans
secured by first-ranking mortgages of Australian residential
properties with a total outstanding balance of AUD9.67bn.
The portfolio is wholly made up of full documentation
loans, which have a weighted average current loan-to-value ratio
of 63.5%, and a weighted average seasoning of 33.2 months.
Floating-rate loans comprise 93% of the cover pool. In a 'AAA'
scenario, Fitch has calculated a weighted average frequency of
foreclosure for the cover assets of 8.4%, and a weighted average
recovery rate of 58.2%.
The cover pool is geographically distributed across
Australia's states, with the largest concentrations being in New
South Wales (37.8%) and Victoria (32.3%). The agency's mortgage
default analysis is based on its Australian residential mortgage
criteria. The Fitch breakeven AP for 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.