Fitch Ratings has affirmed
The Outlook is Stable.
This follows a periodic review of the covered bond programme.
KEY RATING DRIVERS
The rating of the mortgage covered bonds is based on OCBC's Long-Term Issuer Default Rating (IDR), the various uplifts above the IDR granted to the programme and the overcollateralisation (OC) protection provided through the programme's asset percentage (AP).
The covered bonds are rated three 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. For its analysis, Fitch relies on the programme's committed AP used in the asset coverage test of 86.5%.
The Stable Outlook reflects a four-notch buffer against a downgrade of the issuer's IDR.
Uplifts
The resolution uplift remains unchanged at zero notches. Covered bonds and senior unsecured debt are exempt from bail-in under the
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 bond. It also reflects rolling three-month interest protection in the form of a reserve fund covering three months of swap and/or interest payments and senior fees, to be funded if OCBC's Long- and Short-Term IDRs are downgraded below 'A' and 'F1', respectively.
The recovery uplift is unchanged and remains capped at one notch, as Fitch believes the programme is significantly exposed to foreign-exchange risk from recoveries given a default of the covered bonds. This is because the assets are denominated in
'
Fitch's '
The credit-loss component of 3.3% contributes to breakeven OC for the rating. There are no changes to the asset assumptions, as we carried forward the results of our asset analysis from our
Cover Pool Summary
As of the last published investor report, the cover pool consisted of 12,863 loans secured by first-ranking mortgages of
Fitch considered an additional stressed refinancing rate differential of 25bp above
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 at the highest level on Fitch's rating scale and cannot be upgraded.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The covered bond rating is vulnerable to a downgrade if OCBC's IDR is downgraded by five or more notches to 'BBB' or below; or if the relied upon AP considered by Fitch in its analysis provided less protection than 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 ratings are driven by the credit risk of the issuing financial institution, 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 entity, either due to their nature or the way in which they are being managed by the entity. 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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