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Fitch Assigns Westpac's Series 2019-C1 Mortgage Covered Bonds 'AAA'; Outlook Stable

Published 17/01/2019, 11:28 am
Updated 17/01/2019, 11:30 am
© Reuters.  Fitch Assigns Westpac's Series 2019-C1 Mortgage Covered Bonds 'AAA'; Outlook Stable

© Reuters. Fitch Assigns Westpac's Series 2019-C1 Mortgage Covered Bonds 'AAA'; Outlook Stable

(The following statement was released by the rating agency) Fitch Ratings-Sydney-January 16: Fitch Ratings has assigned ratings to Westpac Banking Corporation's (WBC, AA-/Stable/F1+) Series 2019-C1 USD2.0 billion mortgage covered bonds. The Outlook is Stable. This issuance brings WBC's total outstanding covered bonds to AUD30.3 billion. The fixed-rate bonds are due in January 2024 and benefit from a 12-month extendable maturity. KEY RATING DRIVERS The 'AAA' covered bond rating is based on WBC's Long-Term Issuer Default Rating (IDR) of 'AA-', an IDR uplift of zero notches, a payment continuity uplift of six notches, a recovery uplift (RU) of one notch and the asset percentage (AP) of 91.0% used in the programme's asset coverage test, which provides more protection than Fitch's breakeven AP of 91.5%. Fitch's breakeven AP supports a 'AA+' tested rating on a probability-of-default basis and a one-notch RU to 'AAA'. The Stable Outlook reflects a four-notch buffer against a downgrade due to the different uplift factors above the bank's IDR. The 'AAA' breakeven AP of 91.5% corresponds to a breakeven overcollateralisation (OC) of 9.3%. The 'AAA' breakeven OC is driven by an ALM loss component of 4.8%, which represents the non-credit loss components of the breakeven OC for the rating and reflects the modelled mismatches between assets and liabilitiesin the programme. The weighted-average residual life of the cover assets is 15.4 years and of the liabilities is 4.2 years. The credit loss component contributes 4.2% to the breakeven OC for the rating and reflects the credit quality of the underlying cover pool. RATING SENSITIVITIES Westpac Banking Corporation's covered bonds would be vulnerable to downgrade if the relied-upon asset percentage (AP) rises above the 'AAA' breakeven AP of 91.5%, if the bank's Long-Term Issuer Default Rating (IDR) falls below 'BBB+' or if the total number of notches represented by the IDR uplift, payment continuity uplift and recovery uplift is reduced to two or less. If the AP in the programme rises to the maximum 95% contractual AP stipulated in the programme documents, the rating on the covered bonds would fall to 'AA', one notch above the bank's IDR. Fitch's 'AAA' breakeven AP for the covered bond rating will be affected, among other factors, by the profile of the cover assets relative to the 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. Date of Relevant Committee 03-Dec-2018 The source of information used to assess these ratings was WBC. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated bonds is public. Westpac Banking Corporation ----senior secured, Mortgage Covered Bonds, Mortgage Covered Bonds; Long Term Rating; New Rating; AAA; RO:Sta Contacts: Primary Rating Analyst Jimmy Tanzil, Analyst +61 2 8256 0305 Fitch Australia Pty Ltd Level 15 77 King Street Sydney NSW 2000 Secondary Rating Analyst Sambit Agasti, Associate Director +61 2 8256 0337 Committee Chairperson Claire Heaton, Senior Director +61 2 8256 0361

Media Relations: Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com; Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com. Additional information is available on www.fitchratings.com Applicable Criteria Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 01 Aug 2018) https://www.fitchratings.com/site/re/10039504 Bank Rating Criteria (pub. 12 Oct 2018) https://www.fitchratings.com/site/re/10044408 Covered Bonds Rating Criteria - Effective from 8 October 2018 to 11 January 2019 (pub. 08 Oct 2018) https://www.fitchratings.com/site/re/10047240 Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 01 Aug 2018) https://www.fitchratings.com/site/re/10039505 APAC Residential Mortgage Rating Criteria - Effective from 23 October 2018 to 11 January 2019 (pub. 22 Oct 2018) https://www.fitchratings.com/site/re/10046448 Additional Disclosures Solicitation Status https://www.fitchratings.com/site/pr/10058920#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. 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 AT HTTPS://WWW.FITCHRATINGS.COM/SITE/REGULATORY. 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 © 2018 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 Fitch Ratings, Inc. is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (the "NRSRO"). While certain of the NRSRO's credit rating subsidiaries are listed on Item 3 of Form NRSRO and as such are authorized to issue credit ratings on behalf of the NRSRO (see https://www.fitchratings.com/site/regulatory), other credit rating subsidiaries are not listed on Form NRSRO (the "non-NRSROs") and therefore credit ratings issued by those subsidiaries are not issued on behalf of the NRSRO. However, non-NRSRO personnel may participate in determining credit ratings issued by or on behalf of the NRSRO.

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