OREANDA-NEWS.  Fitch Ratings has affirmed BNP Paribas Home Loan SFH's (BNPP HL SFH) EUR21.3bn Obligations de Financement de l'Habitat (OFH) at 'AAA' with a Stable Outlook.

The affirmation follows the annual review of the programme and takes into account the termination of the interest rate swaps today.

KEY RATING DRIVERS
The 'AAA' rating is based on BNP Paribas's (BNPP) Long-term Issuer Default Rating (IDR) of 'A+', which acts as reference IDR for this programme, an unchanged IDR uplift of '2', an unchanged Discontinuity Cap (D-Cap) of 2 (high discontinuity risk) and on the programme's contractual maximum asset percentage (AP) of 92.5%. The Stable Outlook on the OFH reflects that on BNPP's IDR, the French sovereign's IDR and for French residential asset performance.

Fitch's 'AAA' breakeven AP has decreased to 92.5% from 93.0% after taking into account the termination of interest rate swaps. Only non-euro-denominated OFH (7.6% of outstanding bonds) remain hedged by cross-currency swaps. The 92.5% breakeven AP is equivalent to a 8.1% breakeven overcollateralisaton (OC). It considers a two-notch recovery uplift above a 'AA' tested rating on a probability of default basis defined as BNPP's IDR adjusted by the IDR uplift. Timely payment is assumed at a 'AA' rating level irrespective of the actual level of OC protection available.

The 'AAA' breakeven OC is driven by the credit loss component of 6.8%. The cash flow valuation component of 3.2% stands at a relatively low level, despite the termination of interest rate swaps. This reflects the natural hedge between fixed and floating assets and liabilities as well as the substantial excess spread present in the programme. Finally, the asset disposal loss component stands at 0.5% as the OFH would not accelerate should a default occur on the programme, resulting in only a fraction of the assets to be sold to obtain full recoveries on the OFH.

The unchanged D-Cap of '2' remains driven by the weak link assessment of the liquidity gap and systemic risk component. Fitch has revised its assessment of the privileged derivatives risk component to low from moderate as the termination of interest rate swaps reduces the materiality of derivatives within the structure.

The unchanged IDR uplift of '2' reflects exemption of covered bonds from bail-in, Fitch's view that France is a covered bond intensive jurisdiction, the fact that Fitch considers that resolution by other means than liquidation is likely for BNPP and the protection provided by senior unsecured debt in excess of 5% of total adjusted assets.

RATING SENSITIVITIES
BNPP HL SFH's rating would be vulnerable to a downgrade if any of the following occurs: (i) BNPP's IDR is downgraded to 'BBB+' or below or (ii) the sum of the IDR uplift and the D-Cap falls to one or below.