Fitch Ratings has affirmed the mortgage conditional pass-through covered bonds issued under four programmes of three Dutch banks: Achmea Bank N.V. (A/Stable), NIBC Bank N.V. (BBB/Stable) and Van Lanschot Kempen N.V. (Van Lanschot Kempen; BBB+/Stable) at 'AAA' with Stable Outlook.

Fitch does not expect further issuance under Van Lanschot Kempen's public programme or the programmes of Achmea and NIBC. In accordance with our Covered Bonds Rating Criteria, the programmes are therefore deemed to be in wind down and Fitch relies on the programmes' maximum contractual asset percentage (AP) or the level of publicly committed AP in our analysis.

KEY RATING DRIVERS

The 'AAA' break-even AP for the conditional pass-through covered bonds issued by Van Lanschot Kempen under its public programme (Van Lanschot Kempen 1) has been revised to 96.5% from 99.5% and is higher than the 87% committed AP that Fitch considers in its analysis. The 'AAA' covered bonds rating is based on the bank's Long-Term Issuer Default Rating (IDR), the various uplifts above the IDR granted to the programme and the AP protection that Fitch considers in its analysis.

The 'AAA' break-even AP for the conditional pass-through covered bonds issued by Van Lanschot Kempen under its retained programme (Van Lanschot Kempen 2) has been revised to 99.5% from 99% and is higher than the AP that Fitch considers in its analysis - the highest nominal AP level over the last 12 months - of 85.5%. The 'AAA' covered bonds rating is based on the bank's Long-Term IDR, the various uplifts above the IDR granted to the programme and the AP protection that Fitch considers in its analysis.

Van Lanschot Kempen 1's and Van Lanschot Kempen 2's covered bonds are each rated seven notches above the bank's IDR. This is out of a maximum achievable uplift of 12 notches, consisting of an unchanged resolution uplift of two notches, a payment continuity uplift (PCU) of eight notches and a recovery uplift of two notches. The Stable Outlook for the covered bonds reflects a five-notch buffer against an IDR downgrade.

The 'AAA' break-even AP for the conditional pass-through covered bonds issued by NIBC has been revised to 98% from 98.5% and is higher than the 87% committed AP that Fitch considers in its analysis. The 'AAA' covered bonds rating is based on the bank's Long-Term IDR, the various uplifts above the IDR granted to the programme and the AP protection that Fitch considers in its analysis.

NIBC's covered bonds are rated eight notches above the bank's IDR. This is out of a maximum achievable uplift of 12 notches, consisting of an unchanged resolution uplift of two notches, a PCU of eight notches and a recovery uplift of two notches. The Stable Outlook for the covered bonds reflects a four-notch buffer against an IDR downgrade.

The 'AAA' break-even AP for the conditional pass-through covered bonds issued by Achmea remains unchanged at 100% and is higher than the maximum contractual AP of 93.5% that Fitch considers in its analysis. The 'AAA' covered bonds rating is based on the bank's Long-Term IDR, the various uplifts above the IDR granted to the programme and the AP protection that Fitch considers in its analysis.

Achmea's covered bonds are rated five notches above the bank's IDR. This is out of a maximum achievable uplift of 11 notches, consisting of an unchanged resolution uplift of one notch, a PCU of eight notches and a recovery uplift of two notches. The Stable Outlook for the covered bonds reflects a six-notch buffer against an IDR downgrade.

For each of the programmes, given the high over-collateralisation (OC) cushion and stable portfolio characteristics, Fitch has maintained the same credit loss as previously calculated, in accordance with its Covered Bonds Rating Criteria. Each programme benefits from the absence of refinancing risk, due to the conditional pass-through feature of the bonds. In addition, there is excess spread between the mostly fixed-rate assets and the fixed-rate bonds, which also applies during the extension period.

For Van Lanschot Kempen 1, the updated asset and liabilities (ALM) loss component is -0.1% (-2.8% previously), reflecting the pass-through nature of the covered bonds. It also reflects the net present value (NPV) difference between the assets and liabilities given the lower weighted average life (WAL) of the assets (five years) than that of liabilities (5.8 years) under a high prepayment scenario, and the lower excess spread generated under the programme in an 'AA+' stress scenario (3.3% vs. 4.9% previously). It further considers a residual pass-through constraint needed to meet timely interest payments (0.6%) and the cost of reinvestment of cash (0.6%). No asset sales are simulated for the pass-through analysis.

For Van Lanschot Kempen 2, the updated ALM loss component is -3.5% (-2.8% previously), reflecting the pass-through nature of the covered bonds and the excess spread generated under the programme in an 'AA+' stress scenario (5.4%). It also considers a residual pass-through constraint needed to meet timely interest payments (0.5%) and the cost of reinvestment of cash (0.2%). No asset sales are simulated for the pass-through analysis.

For NIBC, the updated ALM loss component is -1.2% (-1.7% previously), reflecting the pass-through nature of the covered bonds and the excess spread generated under the programme in an 'AA+' stress scenario (4.7%). It also considers the cost of reinvestment of cash (1.3%) and a residual pass-through constraint needed to meet timely interest payments (0.4%), with no asset sales simulated for the pass-through analysis.

For Achmea, the updated ALM loss component is -5.1% (-4.9% previously), reflecting the pass-through nature of the covered bonds and the excess spread generated under the programme in an 'AA+' stress scenario (6.7%). It also considers a residual pass-through constraint needed to meet timely interest payments (0.3%), with no asset sales simulated for the pass-through analysis.

Uplifts

For each programme, the unchanged resolution uplift reflects Fitch's assessment that Dutch covered bonds are exempt from bail-in, that resolution of the issuer will not result in the direct enforcement of recourse against the cover pool and the low risk of under-collateralisation at the point of resolution. For Achmea, the one-notch resolution uplift further reflects that the bank's IDR is support-driven. For NIBC, Van Lanschot Kempen 1 and Van Lanschot Kempen 2, the two-notch resolution uplift further reflects that the banks' IDRs are not support-driven.

For each programme, the PCU is eight notches, reflecting the effective principal protection stemming from a maturity extension of the conditional pass-through covered bonds. A reserve account is also available, providing at least three months of interest payment protection.

For each programme, the recovery uplift is two notches, given that the timely payment rating level is in the investment-grade category and no material downside risk to recoveries has been identified. However, in each case, the 'AAA' break-even AP is based on a 'AA+' timely payment rating scenario and a one-notch recovery uplift, as this scenario is supported by a higher AP than a rating based on a two-notch uplift for recoveries above a 'AA' timely payment rating scenario.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Under each programme, the covered bonds are rated 'AAA', which is the highest level on Fitch's scale, and therefore cannot be upgraded.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Achmea's 'AAA' covered bonds' rating would be vulnerable to a downgrade if the bank's Long-Term IDR is downgraded by seven notches to 'BB-' or below, or if the AP considered by Fitch in its analysis provides less protection than Fitch's 100% break-even AP

NIBC's 'AAA' covered bonds' rating would be vulnerable to a downgrade if the bank's Long-Term IDR is downgraded by five notches to 'B+' or below, or if the AP considered by Fitch in its analysis provides less protection than Fitch's 98% break-even AP.

Van Lanschot Kempen 1's 'AAA' covered bonds' rating would be vulnerable to a downgrade if the bank's Long-Term IDR is downgraded by six notches to 'B+' or below, or if the AP considered by Fitch in its analysis provides less protection than Fitch's 96.5% break-even AP.

Van Lanschot Kempen 2's 'AAA' covered bonds' rating would be vulnerable to a downgrade if the bank's Long-Term IDR is downgraded by six notches to 'B+' or below, or if the AP considered by Fitch in its analysis provides less protection than Fitch's 99.5% break-even AP.

Fitch's break-even 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 break-even 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 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579

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 rating is, in each case, 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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