May 12, 2014 / 3:37 PM / 4 years ago

Fitch Affirms Aareal Bank's Mortgage Pfandbriefe at 'AAA'

(The following statement was released by the rating agency) FRANKFURT/LONDON, May 12 (Fitch) Fitch Ratings has affirmed Aareal Bank's (ARB; A-/Negative/F1) outstanding mortgage covered bonds at 'AAA'. The Outlook is Stable. The affirmation follows the implementation of Fitch`s Criteria for Sovereign Risk in Developed Markets for Structured Finance and Covered Bonds, published on 11 April 2014. KEY RATING DRIVERS The rating is based on ARB's Long-term Issuer Default Rating (IDR) of 'A-', the unchanged Discontinuity Cap (D-Cap) of 4 (moderate risk), an IDR uplift of 2 and the over-collateralisation (OC) that Fitch takes into account in its analysis, which is currently 24.2%. The Outlook is Stable despite the Negative Outlook on ARB's IDR, given that any potential downgrade of the issuer's IDR is expected to be compensated by the IDR uplift of 2. The affirmation follows the update of Fitch's analysis of the cover pool and a revision of the breakeven OC for the 'AAA' rating to 23.5% from 21.5%. As of end-March 2014, ARB's mortgage Pfandbriefe amounting to EUR10.6bn were secured by a EUR13.2bn cover pool, which led to a nominal OC of 24.2%. The main driver of Fitch's 'AAA' breakeven OC is the stressed credit loss. In a 'AAA' scenario, Fitch has calculated a weighted average frequency of foreclosure for the cover assets of 78.4% and a weighted average recovery rate of 73.4%, resulting in a weighted average credit loss of 20.9% which is higher compared with calculated losses of 19.2% 12 months ago. The wider credit loss was mainly due to the application of the new sovereign risk criteria. Currently, almost 20 per cent of assets are located in countries with a Country Ceiling (CC) below 'AAA'. This means that, under Fitch's new criteria, the agency has decided not to apply a rating cap to the programme. However, Fitch has stressed recoveries for currency redenomination risk from eurozone assets with a CC below 'AAA'. The reflection of this potential unhedged currency risk resulted in nearly 4 per cent more losses. Fitch notes lower asset-liability mismatches compared with its analysis 12 months ago. Similar to 2013, the programme benefits from a noteworthy portion of callable privately placed Pfandbriefe which provides flexibility for managing asset-liability mismatches. As a result, even under 'AAA' rating stresses there is no need for forced asset sales. Initial open interest and currency positions are significantly mitigated by the inclusion of privileged derivatives in the cover pool. RATING SENSITVITIES In terms of sensitivity of the covered bonds' rating, the 'AAA' rating would be vulnerable to downgrade if any of the following occurs: (i) the IDR is downgraded by three notches or more to 'BBB-' or lower; or (ii) the number of notches represented by the IDR uplift and the D-Cap is reduced to 3 or lower; or (iii) the OC that Fitch considers in its analysis drops below Fitch's 'AAA' breakeven level of 23.5%. The Fitch breakeven OC 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 the breakeven OC to maintain the covered bond rating cannot be assumed to remain stable over time. Contact: Primary Analyst Jan Seemann, CFA Director +49 69 768076 112Primary Analyst Fitch Deutschland GmbH Taunusanlage 17 D-60325 Frankfurt am Main Secondary Analyst Tobias Bayerl Analyst +69 768076 126 Committee Chairperson Rebecca Holter Senior Director +49 69 768076 261 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: christian.giesen@fitchratings.com. Additional information is available on www.fitchratings.com. Applicable criteria, Covered Bonds Rating Criteria (10 March 2014), Counterparty Criteria for Structured Finance and Covered Bonds (13 May 2013), Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (13 May 2013), Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (23 January 2014), Criteria for the Analysis of Commercial Real Estate Loans Securing Covered Bonds (14 October 2014), Covered Bonds Rating Criteria - Mortgage Liquidity & Refinance Stress Addendum (4 February 2014), and Criteria for Sovereign Risk in Developed Markets for Structured Finance and Covered Bonds (11 April 2014), are available on www.fitchratings.com Applicable Criteria and Related Research: Covered Bonds Rating Criteria here Counterparty Criteria for Structured Finance and Covered Bonds here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum here Criteria for Interest Rate Stresses in Structured Finance Transactions here Criteria for the Analysis of Commercial Real Estate Loans Securing Covered Bonds here Covered Bonds Rating Criteria - Mortgage Liquidity & Refinance Stress Addendum – Effective 14 November 2012 to 3 June 2013 here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE 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 EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below