Fitch: Covered Bond Investors Open to Less Mature Markets

(The following statement was released by the rating agency)

Link to Fitch Ratings' Report: Covered Bonds Investor Survey Year-End 2013

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=734995

LONDON, February 11 (Fitch) Fitch Ratings says its latest survey shows that 
covered bond investors are likely to increase their holdings in Canada and 
Australia, as well as in the UK. They are also attracted to higher yields in the 
peripheral eurozone with a much larger proportion planning to increase rather 
than decrease their holdings in Ireland, Italy, Portugal and Spain. 

In its year-end 2013 Covered Bonds Investor Survey, Fitch says a larger 
proportion of the investors surveyed (24%) view regulatory treatment as the 
biggest concern facing covered bonds versus 5% last year. Based on number of 
respondents, regulatory treatment ranked second behind sovereign risk, and on a 
weighted view of the responses, second behind health of the banking sector. The 
uncertain impact of regulatory treatment was highlighted by mixed views on 
whether the Bank Recovery and Resolution Directive would increase or decrease 
the credit risk of covered bonds. Thirty-seven percent of polled investors 
expect higher credit risk, while 36% expect lower credit risk and 27% expect no 
change.

Continuing a trend from the past two annual surveys, significant proportions of 
respondents will consider investing in less traditional amortisation and cover 
asset types. Thirty-nine percent are prepared to buy covered bonds with a 
conditional pass-through redemption profile with 24% willing to buy those that 
amortise on a full pass-through basis. Investors also display flexibility 
regarding cover asset type: approximately 30% of respondents are comfortable 
buying covered bonds secured by senior tranches of MBS or SME loans. 

Both the covered bond and issuer ratings are important to the investors 
surveyed. Twenty-one percent deem the issuer rating to be more important than 
the covered bond rating, with an additional 33% considering it as important as 
the covered bond rating. Ninety-four percent look for at least one rating for 
their covered bonds, but a 'AAA' rating is only required by 10% of respondents.

Overall, 53 investors responded to the survey, of which 16% have more than 
EUR20bn of covered bonds under management, 22% have between EUR5bn and EUR20bn, 
and 62% have less than EUR5bn in their portfolios. Nineteen percent of 
respondents are based outside of EMEA compared with 5% last year.  Although not 
exhaustive, Fitch deems the sample to be indicative of covered bonds investors 
as a whole.

The full survey is available on www.fitchratings.com or by clicking on the link 
above.

Contact: 

Joar Johnsen

Director

+44 20 3530 1214

Fitch Ratings Limited

30 North Colonnade

London E14 5GN 

Suzanne Albers

Senior Director

+44 20 3530 1165 

Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, 
Email: christian.giesen@fitchratings.com.

Additional information is available on www.fitchratings.com.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: 
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING 
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S 
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND 
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF 
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE 
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF 
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE 
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS 
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED 
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH 
WEBSITE.

(Repeat for additional subscribers)

Feb 11 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings says its latest survey shows that covered bond investors are likely to increase their holdings in Canada and Australia, as well as in the UK. They are also attracted to higher yields in the peripheral eurozone with a much larger proportion planning to increase rather than decrease their holdings in Ireland, Italy, Portugal and Spain. In its year-end 2013 Covered Bonds Investor Survey, Fitch says a larger proportion of the investors surveyed (24%) view regulatory treatment as the biggest concern facing covered bonds versus 5% last year. Based on number of respondents, regulatory treatment ranked second behind sovereign risk, and on a weighted view of the responses, second behind health of the banking sector. The uncertain impact of regulatory treatment was highlighted by mixed views on whether the Bank Recovery and Resolution Directive would increase or decrease the credit risk of covered bonds. Thirty-seven percent of polled investors expect higher credit risk, while 36% expect lower credit risk and 27% expect no change.

Continuing a trend from the past two annual surveys, significant proportions of respondents will consider investing in less traditional amortisation and cover asset types. Thirty-nine percent are prepared to buy covered bonds with a conditional pass-through redemption profile with 24% willing to buy those that amortise on a full pass-through basis. Investors also display flexibility regarding cover asset type: approximately 30% of respondents are comfortable buying covered bonds secured by senior tranches of MBS or SME loans.

Both the covered bond and issuer ratings are important to the investors surveyed. Twenty-one percent deem the issuer rating to be more important than the covered bond rating, with an additional 33% considering it as important as the covered bond rating. Ninety-four percent look for at least one rating for their covered bonds, but a 'AAA' rating is only required by 10% of respondents. Overall, 53 investors responded to the survey, of which 16% have more than EUR20bn of covered bonds under management, 22% have between EUR5bn and EUR20bn, and 62% have less than EUR5bn in their portfolios. Nineteen percent of respondents are based outside of EMEA compared with 5% last year. Although not exhaustive, Fitch deems the sample to be indicative of covered bonds investors as a whole.

The full survey is available on Href="Link">www.fitchratings.com or by clicking on the link above.

Link to Fitch Ratings' Report: Covered Bonds Investor Survey Year-End 2013

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=734995

((Bangalore Ratings Team, Hotline: +91 80 6677 2513 Debanjali.Ghosh@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Debanjali.Ghosh.reuters.com@reuters.net))

Keywords: Fitch: Covered Bond Investors Open to Less Mature