OREANDA-NEWS. Fitch Ratings has affirmed ABN AMRO Bank N.V.'s (ABN, A/Stable/F1) EUR23.3bn equivalent mortgage covered bonds at 'AAA'. The Outlook is Stable.

KEY RATING DRIVERS
The rating reflects ABN's Long-term Issuer Default Rating (IDR) of 'A', an unchanged IDR uplift of 2 notches, an unchanged D-Cap of 4 notches (moderate risk) and the 76.6% asset percentage (AP) that Fitch takes into account in its analysis, which provides more protection than the 80.0% breakeven AP for the 'AAA' rating. The latter supports a 'AA' tested rating on a probability of default basis and a two-notch recovery uplift to a 'AAA' rating. The Stable Outlook is driven by the three-notch cushion against a downgrade of ABN's IDR.

The unchanged D-Cap of 4 notches reflects moderate payment interruption risk. The weakest links remain the asset segregation, liquidity gap and systemic risk, cover pool-specific alternative management and privileged derivatives components. The moderate risk assessment for the liquidity gap & systemic risk component takes into account mitigants against liquidity gaps in the form of a three-month interest reserve fund, the pre-maturity test for the hard bullet bonds (32% of all series) and the 12-month extendible feature for the series that were converted into soft bullet in April 2015.

The 80.0% 'AAA' breakeven AP has decreased from 80.5% since November 2014. It is equivalent to a breakeven OC of 25% which is primarily driven by the asset disposal loss component of 21.1% due to large maturity mismatches between the assets and the liabilities, including a 3.5% impact of the amortisation test.

The 80.0% 'AAA' breakeven AP is also partly driven by a 7.3% 'AAA' credit loss component, which represents the impact on the breakeven AP from a 15.2% weighted average default rate (WAFF) and a 55.0% weighted average recovery rate (WARR) for the mortgage cover assets in a 'AAA' scenario. The latest WAFF and WARR are almost unchanged from 15.3% and 55.1%, respectively, reflecting the stable nature of the cover pool since the last review. The cash flow valuation component is -0.8% in a 'AAA' scenario. The breakeven AP considers whether timely payments are met in a 'AA' scenario and tests for recoveries given default of at least 91% in a 'AAA' scenario.

RATING SENSITIVITIES
The 'AAA' rating would be vulnerable to downgrade if any of the following occurs: (i) ABN AMRO Bank N.V.'s IDR is downgraded by four or more notches to 'BBB-' or below; or (ii) the number of notches represented by the IDR uplift and the D-Cap is reduced to two or lower; or (iii) the AP that Fitch considers in its analysis increases above Fitch's 'AAA' breakeven level of 80%.

The Fitch breakeven AP for the covered bond rating will be affected, among others, by the profile of the cover assets relative to outstanding covered bonds, which can change over time, even in the absence of new issuance. Therefore the breakeven AP to maintain the covered bond rating cannot be assumed to remain stable over time.