November 22, 2017 / 5:43 AM / 24 days ago

Fitch Rates DBS Series 6 EUR500m Mortgage Covered Bonds 'AAA'; Outlook Stable

(The following statement was released by the rating agency) SEOUL/SYDNEY, November 22 (Fitch) Fitch Ratings has assigned DBS Bank Ltd.'s (AA-/Stable/F1+) Series 6 EUR500 million mortgage covered bonds a rating of 'AAA'. The Outlook is Stable. The Series 6 bonds are due November 2024, and have a 12-month extension period. This issuance brings total outstanding covered bonds on issue out of DBS's covered bonds programme to the equivalent of SGD5.0 billion. KEY RATING DRIVERS The programme's rating is based on DBS's Long-Term Issuer Default Rating (IDR) of 'AA-', an IDR uplift of zero notches, a payment continuity uplift (PCU) of six notches, a recovery uplift of one notch and the asset percentage (AP) of 85.0% used in the programme's asset coverage test, which Fitch relies upon in its analysis. The relied-upon AP equals Fitch's 'AAA' breakeven AP and corresponds to an 'AA+' tested rating on a probability of default basis and a one-notch recovery uplift. The recovery uplift was capped at one notch as the programme is significantly exposed to foreign-exchange risk in the recoveries given default of the covered bonds. This is because the assets are denominated in Singapore dollars, while the covered bonds issued are denominated in other currencies. Currency risk is hedged for the length of the liabilities, but we expect those hedges to terminate in the event of a covered bond default so that the longer-dated Singapore-dollar asset cash flows would provide recoveries in a different currency than the initial covered bond. The Outlook on the covered bond rating reflects the Stable Outlook on DBS's Long-Term IDR and a four-notch buffer against downgrade of the issuer's IDR. Based on our cash flow analysis of the cover pool at 9 October 2017, the 'AAA' breakeven AP of 85.0% is equivalent to a breakeven overcollateralisation (OC) of 17.6%. This is driven by the asset disposal loss of 17.4%, which reflects the significant asset and liability mismatches in the programme, with the weighted-average (WA) life of the cover assets at 11.9 years and the liabilities at 3.5 years. The credit loss component contributes 3.4% to breakeven OC, and the cash flow component reduces it by 3.1% due to the available excess spread modelled by Fitch in the programme. DBS has incorporated new assets into the cover pool on 23 October 2017, which almost doubles the size of the existing cover pool. The characteristics of the newly incorporated loans and their cash flows are broadly in line with that of the previously published cover pool. Hence, Fitch's breakeven OC and its components are as described above. Fitch applied a variation to the APAC Residential Mortgage Rating Criteria, which does not include an analytical treatment for asset basis risk. Fitch deems the risk relevant to the enhancement level of DBS's programme as 49.3% of the cover pool's mortgage assets are linked to floating rate market-linked indices. The indices are: the one-month, three-month and 12-month Singapore Interbank Offered Rate (SIBOR) and the three-month Swap Offer Rate (SOR), all of which reset at regular intervals. Fitch bases its assumption on the one-month SOR, as this is the index used for the liability swaps on the issued covered bonds. We deduct 7bp on average from the mortgages' spreads linked to the market rates described above, based on our analysis of the historical movement of the market indices over 17 years. There is no rating impact from this criteria variation. RATING SENSITIVITIES The 'AAA' rating on DBS Bank Ltd.'s (DBS) mortgage covered bonds are vulnerable to a downgrade if the relied-upon asset percentage (AP), used in the asset coverage test, rises above Fitch's 'AAA' breakeven AP of 85.0% or if the bank's Long-Term Issuer Default Rating (IDR) falls below 'BBB+'. If the AP in the programme rises to the maximum 97% AP allowed by the Monetary Authority of Singapore, the rating on the programme would be downgraded to 'AA', one notch above the bank's IDR. Fitch's 'AAA' breakeven AP for the covered bond rating will be affected, among other things, 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 that the 'AAA' breakeven AP, which maintains the covered bond rating, will remain stable over time. Contact: Primary Analyst Keum Hee Oh Director +82 2 3278 8373 Fitch Australia Pty Ltd, Korea Branch 9F, 97 Uisadang-daero Yeongdeungpo-gu Seoul, 07327 South Korea Secondary Analyst Claire Heaton Senior Director +61 2 8256 0361 Committee Chairperson Carmen Munoz Senior Director +34 93 323 8408 - The source of information used to assess these ratings was DBS. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated bonds is public. Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria APAC Residential Mortgage Rating Criteria (pub. 14 Jul 2017) here Covered Bonds Rating Criteria (pub. 30 Oct 2017) here Fitch's Cover Assets Refinancing Spread Level (RSL) Assumptions - Excel File (pub. 30 Oct 2017) here Global Bank Rating Criteria (pub. 25 Nov 2016) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 23 May 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 23 May 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy 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 WEB SITE AT 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. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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