Moody's Publishes New Zealand Covered Bonds Performance Overviews: Q1 2016
Moody's Investors Service has published performance overviews for Q1 2016 for five New Zealand covered bond programs.
The Covered Bond Anchor Points--representing counterparty risk assessments--for all New Zealand covered bond issuers are at Aa2(cr) with a stable outlook except for Kiwibank Limited. On 7 April 2016, Moody's placed Kiwibank Limited's counterparty risk assessment of Aa2 (cr) on review for downgrade.
The collateral scores of the covered bond programs for the five major issues in the New Zealand covered bond market ranged from 5.0% to 6.1%.
For Q1 2016, the weighted average current loan-to-value of the residential mortgage loans in the cover pools ranged between 45.6% and 57.3%.
The programs' minimum over-collateralization (OC) level commensurate with a Aaa rating ranged from 1.2% to 1.4% for the five major issues in the New Zealand covered bond market, namely, ANZ Bank New Zealand Limited (ANZ NZ, Aa2(cr)/P-1(cr)), ASB Bank Limited (ASB, Aa2(cr)/P-1 (cr)), Bank of New Zealand (BNZ, Aa2(cr)/P-1(cr)), Kiwibank Limited (Kiwibank, Aa2(cr) Review for Downgrade/P-1(cr) Review for Downgrade), and Westpac New Zealand Limited (Westpac NZ, Aa2(cr)/P-1(cr)). The committed OC level for the five programs ranged from 15.6% to 21.4%.
Moody's raised the Timely Payment Indicator (TPI) on all covered bond programs in New Zealand to "Probable" from "Improbable" on 26 April 2016. The increasing depth of New Zealand's covered bond market and the supportive legal frameworks in the country underpinned Moody's decision to adjust the TPI assumptions for covered bonds in New Zealand. For more information, refer to https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1024075
Improvements in the TPI, mean that covered bond ratings are less dependent on an issuer's creditworthiness, thereby improving the stability of ratings. The TPI leeway indicates the number of notches that an issuer's covered bond anchor could fall before Moody's would downgrade the covered bond because of the TPI limitation. For the affected programs in New Zealand, the TPI leeway has risen by two notches, to four.
Moody's also lowered the refinancing margin for all New Zealand covered bond programs, thereby aligning them with those of the covered bonds in other highly rated countries.
In Q1 2016, a total of NZD300 million in New Zealand covered bonds were issued.
The amount of outstanding New Zealand covered bonds as of end-Q1 2016 was at NZD15.4 billion