OREANDA-NEWS.  Fitch Ratings has assigned National Australia Bank Limited's (NAB, AA-/Stable/F1+) Series 24 EUR1bn mortgage covered bonds a rating of 'AAA'. The Outlook is Stable. This brings NAB's total outstanding issuance to AUD18.12bn. The fixed-rate bond is due in February 2027 and benefits from a 12-month extendable maturity.

KEY RATING DRIVERS
The rating is based on: NAB's Long-Term Issuer Default Rating (IDR) of 'AA-'; a Discontinuity Cap (D-Cap) of 3 (high); and an asset percentage (AP) of 89.5%, which is equivalent to Fitch's breakeven AP for a 'AAA' rating, supporting a tested rating of 'AA' on a probability of default (PD) basis and a 'AAA' rating after giving credit for recoveries. The Outlook on the covered bonds reflects the Stable Outlook on NAB's IDR.

Maturity mismatches are significant, with the weighted-average residual life of the assets at 16.4 years and the liabilities at 6.0 years. This new 12 year bond issue has slightly extended the weighted average life of the liabilities, which was previously at 5.7 years.

RATING SENSITIVITIES
The 'AAA' rating would be vulnerable to downgrade should any of the following occur: NAB's IDR was downgraded by three notches; the D-Cap fell by more than two categories; or the AP that Fitch takes into account in its analysis increased above the 'AAA' breakeven AP of 89.5%.