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Fitch Affirms Achmea's Covered Bonds at 'AAA'/Stable; No Rating Impact From Merger
June 2, 2014 / 3:06 PM / in 3 years

Fitch Affirms Achmea's Covered Bonds at 'AAA'/Stable; No Rating Impact From Merger

(The following statement was released by the rating agency) LONDON, June 02 (Fitch) Fitch Ratings has affirmed Achmea Hypotheekbank N.V.'s (AHB, A-/Stable/F2) mortgage covered bonds at 'AAA' with a Stable Outlook following a full review of the programme. The ratings are not affected by the merger of AHB with its sister company Achmea Retail Bank N.V. (ARB), which collects retail deposits via direct channels, and Achmea Bank Holding N.V., the holding company of AHB and ARB. The merged entity will be named Achmea Bank N.V. (Achmea Bank). This was completed on 31 May 2014. The merger exposes the covered bonds to deposit set-off risk, as Achmea Bank is a deposit- taking institution. This will, however be mitigated by a deduction of the amount at risk from the total amount of assets taken into account in the asset coverage test (ACT). KEY RATING DRIVERS The 'AAA' rating is based on AHB's Long-Term IDR of 'A-' , an unchanged discontinuity cap (D-Cap) of 4 (moderate), and the 75% asset percentage (AP) from AHB's investor report that Fitch takes into account in its analysis, which provides the same amount of protection as Fitch's breakeven AP. No IDR uplift is applicable. As of end-February 2014, the cover pool consisted of 2,869 prime Dutch mortgages with a total balance of EUR319m, reduced from EUR2.4bn in January 2014, following the redemption of the last benchmark issuance of EUR1.5bn. The issuer removed higher loan-to-value (LTV) loans from the cover pool. As a result, the portfolio's seasoning increased and the 'AAA' expected loss decreased to 4.4% in February 2014 from 7.4% in June 2013. The portfolio's weighted average (WA) original (LTV) is 72.8%, with a WA indexed LTV of 66.6%. Employee loans comprise 18.3% in the pool, for which Fitch has increased the probability of default. Fitch's 'AAA' breakeven AP remains at 75%. Any future deterioration or adverse selection of the cover assets will negatively affect the 'AAA' breakeven AP. In addition, the issuer commits to a minimum level of OC of 33% in its annual report. Only two Swiss francs denominated bonds remain outstanding for an equivalent amount of EUR157m with a final maturity in August 2014 and 2017 respectively. Since no further issuance is expected in the near term the programme is classified as dormant and Fitch only gives credit to the 75% AP commitment of the issuer. RATING SENSITIVITIES The 'AAA' rating would be vulnerable to downgrade if any of the following occurs: (i) the IDR is downgraded by at least one notch to 'BBB+'; or (ii) the D-Cap falls by at least one category to 3 (moderate high risk); or (iii) the AP that Fitch considers in its analysis increases above Fitch's 'AAA' breakeven level of 75%. The Fitch breakeven AP for the covered bond rating will be affected, amongst 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 AP for the 'AAA' rating cannot be assumed to remain stable over time. More details on the portfolio and Fitch's analysis will be available in a full rating report, which will shortly be available at Contact: Primary Analyst Kevin Vanistendael Analyst +44 20 7530 1564 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Stephen Kemmy Director +44 20 7530 1474 Committee Chairperson Cosme de Montpellier Senior Director +44 20 7530 1407 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: Additional information is available on Applicable criteria, 'Covered Bonds Rating Criteria', dated 10 March 2014, 'Counterparty Criteria for Structured Finance and Covered Bonds', dated 14 May 2014, 'Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum', dated 14 May 2014, 'Covered Bond Rating Criteria - Mortgage Liquidity and Refinance Stress Addendum', dated 04 February 2014,' EMEA Residential Mortgage Loss Criteria', dated 28 May 2014 and EMEA Criteria Addendum - Netherlands', dated 13 June 2013 are available at 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 Covered Bonds Rating Criteria - Mortgage Liquidity and Refinance Stress Addendum here EMEA Residential Mortgage Loss Criteria here EMEA Criteria Addendum - Netherlands - Mortgage Loss and Cash Flow Assumptions 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.

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