Fitch Rates NAB's First Domestic Covered Bond 'AAA'/Stable <Origin Href="QuoteRef">NAB.AX</Origin>

(The following statement was released by the rating agency)

SYDNEY, March 11 (Fitch) Fitch Ratings has assigned National Australia Bank 
Limited's (NAB, AA-/Stable/F1+) Series 19-1 issue of AUD750m mortgage covered 
bonds a rating of 'AAA'. The Outlook is Stable. The fixed-rate bond is due in 
March 2024 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 
'AA' rating 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.

As of 21 February 2014, the cover pool consisted of 60,274 loans secured by 
first-ranking mortgages of Australian residential properties with a total 
outstanding balance of AUD16.7bn. 

Maturity mismatches are significant, with the weighted-average residual life of 
the assets at 16.2 years and of the liabilities at 4.4 years. 

RATING SENSITIVITIES

The 'AAA' rating could 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%.

Contacts:

Primary Analyst

James Leung

Director

+61 2 8256 0322

Fitch Australia Pty Ltd., Level 15, 77 King Street, Sydney NSW 2000

Secondary Analyst

Claire Heaton

Director 

+61 2 8256 0361

Committee Chairperson

Natasha Vojvodic

Senior Director

+61 2 8256 0350

The source of information used to assess these ratings was National Australia 
Bank Limited. The issuer has informed Fitch that not all relevant underlying 
information used in the analysis of the rated bonds is public.

Applicable criteria, 'Covered Bonds Rating Criteria', dated 10 March 2014; 
'Counterparty Criteria for Structured Finance and Covered Bonds', dated 13 May 
2013; 'Counterparty Criteria for Structured Finance and Covered Bonds: 
Derivative Addendum', dated 13 May 2013 ; and 'APAC Residential Mortgage 
Criteria', dated 1 August 2013; 'APAC Residential Mortgage Criteria Addendum - 
Australia', dated 1 August 2013; 'Covered Bonds Rating Criteria - Mortgage 
Liquidity & Refinance Stress Addendum' dated 4 February 2014; 'Global Criteria 
for Lender's Mortgage Insurance in RMBS', dated 1 August 2013, are available at 
www.fitchratings.com.

Media Relations: Iselle Gonzalez, Sydney, Tel: +61 2 8256 0326, Email: 
iselle.gonzalez@fitchratings.com.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research: 

Covered Bonds Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738975

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=707155

Counterparty Criteria for Structured Finance and Covered Bonds: Derivative 
Addendum

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=707156

APAC Residential Mortgage Criteria - Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709855

APAC Residential Mortgage Criteria Addendum – Australia - Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=710259

Covered Bonds Rating Criteria - Mortgage Liquidity and Refinance Stress Addendum

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709665

Global Criteria for Lenders’ Mortgage Insurance in RMBS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709255

Additional Disclosure 

Solicitation Status 

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=823376

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 
FREE WEB SITE AT 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.

Fitch Australia Pty Ltd holds an Australian financial services licence (AFS 
licence no. 337123) which authorises it to provide credit ratings to wholesale 
clients only. Credit ratings information published by Fitch is not intended to 
be used by persons who are retail clients within the meaning of the Corporations 
Act 2001.