Fitch Ratings has assigned
The Outlook is Stable.
This is the second issuance under the programme, totaling AUD750 million, which is split over Series 2023-1 and Series 2023-2. Series 2023-1 is a AUD400 million floating rate bond and Series 2023-2 is a AUD350 million fixed-rate bond. Both bonds are due
KEY RATING DRIVERS
The '
The covered bonds are rated six notches above the bank's IDR, at the highest end of the rating scale. This is out of a maximum achievable uplift of eight notches, consisting of a resolution uplift of zero notches, a payment continuity uplift (PCU) of six notches and a recovery uplift of two notches. We rely on the 91.5% AP applied in the asset coverage test, which provides more protection than Fitch's '
The Stable Outlook reflects a two-notch buffer against a downgrade of the issuer's IDR.
'
The '
The ALM loss component, which reflects the modelled asset and liability mismatches, inclusive of the modelled excess spread and the pro rata sales constraint, contributed 2.5%. This has increased from the previous level of 2.1% as the new bonds have increased the weighted-average bond margin and bond swap margin, which slightly reduced the modelled excess spread. Nonetheless, Fitch's breakeven AP remains unchanged even after an increase of the ALM loss component due to the AP being rounded to the nearest 0.5%.
The key rating drivers listed in the applicable sector criteria, but not mentioned above, are not material to this rating action.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The covered bonds are rated at the highest level on Fitch's scale and cannot be upgraded.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The covered bond rating is vulnerable to a downgrade if BEN's IDR is downgraded by three or more notches to 'BBB-' or below; or if the AP considered by Fitch in our analysis were to provide less protection than Fitch's '
Fitch's breakeven AP for the covered bond rating will be affected, among other factors, 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 to maintain the covered bond rating cannot be assumed to remain stable over time.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
SOURCES OF INFORMATION
The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated bonds is public.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The covered bond rating is driven by the credit risk of the issuing financial institution, as measured by its Long-Term IDR.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the bonds (or programme), either due to their nature or the way in which they are being managed by the bonds. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
(C) 2023 Electronic News Publishing, source