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Moody's Investors Service says that the performance of Australian covered bond programmes was stable during Q4 2015.
The stable and strong financial standings of each program's issuer, the stable credit quality of the cover pool assets -- comprised of residential mortgage loans -- and the stable Aaa rating of the Australian sovereign all contributed to the stable performance of the programmes.
The Covered Bond Anchor Points -- counterparty risk assessments -- for all Australian covered bond issuers range between Aa3(cr) and Aa1(cr) with a stable outlook.
The credit quality of the cover pool assets has been stable. The average collateral score improved to 4.8% in Q4 2015 from 6.4% in Q3 2015, partly due to a more granular assessment of the cover pool assets, based on loan-by-loan data.
For Q4 2015, the weighted average current loan-to-value ratios of the residential mortgage loans in the cover pools ranged between 55.7% and 66.4%.
The programmes' average minimum over-collateralization (OC) commensurate with a Aaa rating remained unchanged from Q3 2015 at 0% for the four major issuers in the Australian covered bond market -- Australia and New Zealand Banking Group Limited (ANZ, Aa1(cr), Aa2/P-1, stable), Commonwealth Bank of Australia (CBA, Aa1(cr), Aa2/P-1, stable), National Australia Bank Limited (NAB, Aa1(cr), Aa2/P-1, stable) and Westpac Banking Corporation (Westpac, Aa1(cr), Aa2/P-1, stable).
Meanwhile, the minimum over-collateralization (OC) commensurate with a Aaa rating decreased to 5.7% in Q4 2015 from 6.7% in Q3 2015 for Suncorp-Metway Limited (Suncorp, Aa3(cr), A1/P-1, stable), a major regional bank.
Average committed OC levels stayed at 12.5% in Q4 2015 and higher than necessary for maintaining current ratings, with a simple average buffer of 11.4 percentage points.
The strong credit quality of all Australian covered bond programmes will continue in 2016, owing to the strong and stable financial standing of issuers and the strong and stable sovereign credit quality of Australia.
In Q4 2015, AUD2.9 billion in Australian covered bonds were issued. The outstanding total for Australian covered bonds as of the end of Q4 2015 was AUD89.4 billion.
