Fitch Ratings has affirmed
The Outlook is Stable.
KEY RATING DRIVERS
The covered bonds' '
The rating for CAnb's covered bonds are rated five notches above the bank's IDR. This is out of a maximum achievable uplift of nine notches, consisting of a resolution uplift of one notch, a payment continuity uplift (PCU) of six notches, and a recovery uplift of two notches.
For CAnb's covered bonds, Fitch relies on the highest AP of the past 12 months of 85.6%, which provides more protection than Fitch's '
'
Fitch's '
The widened ALM loss is primarily driven by reduced excess spread, as interest rates on the cover assets have remained stable, while the average coupon on the liabilities has increased following recent covered bond issuance. The credit loss for the programme is unchanged at 4%, and is derived from the cover pool's weighted average foreclosure frequency and recovery rate stressed at the 'AA' timely payment rating level. We carried forward the results of our asset model as the pool characteristics have not materially changed since the last rating action in
Uplifts
Fitch has granted a resolution uplift of one notch to CAnb's covered bond programme. The resolution uplift reflects that secured liabilities in
The six-notch PCU uplift of CAnb's covered bonds reflects provisions for principal and interest payment protection to ensure continuity of payments on the covered bond upon a switch to the cover pool as a source of covered bonds payment. The covered bonds are supported by a 12-month principal maturity extension clause and will benefit from a liquidity reserve fund covering three months of interest due plus senior expenses, should CAnb's IDRs fall below 'A' and 'F1'.
The two-notch recovery uplift to CAnb's covered bonds reflects the programme's timely payment rating level in the investment-grade range, and that no material downside risk to recoveries have been identified. Notably, all assets and bonds are denominated in the same currency of Swiss franc.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The covered bonds are rated '
Factors that could, individually or collectively, lead to negative rating action/downgrade:
CAnb's '
If the AP that Fitch relies on in its analysis increases to the contractual maximum AP of 95%, the covered bonds' rating would be downgraded by two notches to 'AA'.
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 '
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 bonds' ratings are driven by the credit risk of the issuer 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 entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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