Fitch Rates CBA's Series 50 & 51 Covered Bonds 'AAA'; Outlook Stable

(The following statement was released by the rating agency)SYDNEY, February 09 (Fitch) Fitch Ratings has assigned Commonwealth Bank of Australia's (CBA, AA-/Stable/F1+) Series 50 EUR750m and Series 51 EUR500m mortgage covered bonds a rating of 'AAA'. The Outlook is Stable. This brings the total outstanding issuance to AUD24.3bn. Both fixed-rate bonds are due in February 2021 and February 2031 respectively, and benefit from a 12-month extendable maturity.KEY RATING DRIVERSThe rating is based on CBA's Long-Term Issuer Default Rating (IDR) of 'AA-', a Discontinuity Cap (D-Cap) of 4 notches (moderate risk), and the asset percentage (AP) relied upon in Fitch's analysis of 89.5%, which is equivalent to Fitch's 'AAA' breakeven AP of 89.5%. The breakeven AP supports a 'AA' tested rating on a probability of default (PD) basis and a 'AAA' rating after giving credit for recoveries. The Outlook on the covered bonds reflects the Stable Outlook on CBA's IDR.The 89.5% 'AAA' breakeven AP corresponds to a breakeven over-collateralisation (OC) of 11.7%. The asset disposal loss component of 14.3% remains the main driver due to significant maturity mismatches between the cover assets at 14.8 years versus the liabilities at 4.8 years and the refinancing assumptions applied to Australian residential mortgages. This is followed by the cover pool's credit loss component of 3.6%. Credit given to excess spread under the cash flow valuation component reduced the 'AAA' breakeven OC by 5.0%.RATING SENSITIVITIESThe 'AAA' rating would be vulnerable to a downgrade should any of the following occur: CBA's IDR is downgraded by four notches; the D-Cap falls by more than three notches; or the AP that Fitch takes into account in our analysis rises above the 'AAA' breakeven AP of 89.5%.Fitch's 'AAA' breakeven AP for the covered bond rating will be affected, among others, 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 'AAA' breakeven AP to maintain the covered bond rating cannot be assumed to remain stable over time.Contact: Primary Analyst Claire Heaton Senior Director +61 2 8256 0361 Fitch Australia Pty Ltd. Level 15, 77 King St, Sydney NSW 2000 Secondary Analyst James LeungDirector +61 2 8256 0322Committee Chairperson Natasha Vojvodic Senior Director +61 2 8256 0350 Date of relevant committee: 7 December 2015The source of information used to assess these ratings was Commonwealth Bank of Australia. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated bonds is public.Media Relations: Leni Vu, Sydney, Tel: +61 2 8256 0304, Email: leni.vu@fitchratings.com.Additional information is available on www.fitchratings.comApplicable Criteria APAC Residential Mortgage Criteria (pub. 23 Jun 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867437Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744175Covered Bonds Rating Criteria (pub. 23 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868658Covered Bonds Rating Criteria – Mortgage Liquidity and Refinancing Stress Addendum (pub. 23 Sep 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871331Fitch's Mortgage Covered Bond Refinancing Stresses - Excel File (pub. 23 Nov 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874101Global Criteria for Lenders’ Mortgage Insurance in RMBS (pub. 23 Jun 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865195Additional Disclosures Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=999277Endorsement Policy https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det ail=31ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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. 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.