Moody's: New Zealand covered bond performance stable in Q4 2015

Moody's says that the performance of New Zealand's covered bond programmes was stable during Q4 2015.

The stable performance was supported by New Zealand's stable Aaa sovereign rating, the strong and stable financial profiles of the issuers, and the stable credit quality of the cover pool assets, which mainly comprised residential mortgage loans.

The Covered Bond Anchor Points -- counterparty risk assessments -- for all New Zealand covered bond issuers are Aa2(cr) with a stable outlook.

The credit quality of the cover pool assets was stable. The average collateral score improved to 5.3% in Q4 2015 from 6.0% in Q3 2015, partially due to a more granular assessment of the cover pool assets, based on loan-by-loan data.

The weighted average current loan-to-value ratios (LTVs) of the residential mortgage loans in the cover pools ranged between 46.5% and 57.4%.

The programmes' average minimum over-collateralization (OC) level commensurate with a Aaa rating decreased to 2.0% from 2.4% in Q3 2015 for the five major issuers in the New Zealand covered bond market -- ANZ Bank New Zealand Limited (ANZ NZ, Aa2(cr), Aa3/P-1, stable), ASB Bank Limited (ASB, Aa2(cr), Aa3/P-1, stable), Bank of New Zealand (BNZ, Aa2 (cr), Aa3/P-1, stable), Kiwibank Limited (Kiwibank, Aa2(cr), Aa3/P-1, stable), and Westpac New Zealand Limited (Westpac NZ, Aa2(cr), Aa3/P-1, stable).

Average committed OC levels fell slightly to 16.9% from 17.0% in Q3 2015, and higher than necessary for maintaining current ratings, with a simple average buffer of 14.9 percentage points.

The strong credit quality of all New Zealand 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 New Zealand.

In Q4 2015, NZD2.4 billion in New Zealand covered bonds were issued.

The amount of outstanding New Zealand covered bonds as of the end of Q4 2015 was NZD15.1 billion.