Fitch Ratings has affirmed
The Outlook is Stable.
This follows a periodic review of the covered bond programme.
KEY RATING DRIVERS
The '
The covered bonds are rated four notches above the bank's IDR, at the highest end of the rating scale. This is out of a maximum achievable uplift of seven notches, consisting of a resolution uplift of zero notches, a payment continuity uplift (PCU) of six notches and a recovery uplift of one notch. Fitch's analysis relies on the programme's committed AP of 93.4% used in the programme's asset coverage test, which provides more protection than Fitch's breakeven AP of 95.0%. We have revised the breakeven AP from 96.0%.
The Stable Outlook on the rating reflects the three-notch buffer against a downgrade of the issuer's IDR.
Uplifts
The resolution uplift remains unchanged at zero notches. There is no specific advanced resolution regime in
The PCU remains unchanged at six notches and reflects the strength of liquidity protection in the form of a 12-month extension period on the soft-bullet bonds. It also reflects the three-month interest protection in the form of a reserve that will be funded upon the issuer's loss of 'A-' and 'F1' ratings.
The recovery uplift on the rating is capped at one notch, as the programme is exposed to foreign-exchange risk from recoveries given default of the covered bonds, which will lower our recovery expectation. This is because the assets are denominated in Australian dollars, while around 93% of the covered bonds outstanding are denominated in other currencies. Swaps are in place on the liabilities, but we expect these swaps to terminate following a default of the covered bonds, exposing recoveries to currency risk.
Revised '
Fitch's '
The ALM loss has increased to 1.8%, from 0.8%, driven by a slightly lower net asset margin modelled on variable rate mortgages above the Bank Bill Swap Rate (BBSW) index, which has risen over the year. The credit loss component reflects the credit quality of the underlying cover pool and contributes 3.3% to the breakeven OC for the rating. This component has remained unchanged at 3.3% since the previous analysis.
Cover Pool Summary
The cover pool consisted of 126,204 loans secured by first-ranking mortgages on Australian residential properties, with a total outstanding balance of about AUD38.7 billion at
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 rating on the covered bonds is '
Factors that could, individually or collectively, lead to negative rating action/downgrade:
WBC's '
Fitch's '
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, WBC, as measured by its Long-Term IDR.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the programme, either due to their nature or the way in which they are being managed by the programme. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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