KangaNews Event Report - ASF London Investor Seminar, 10 June 2019

EVENT REPORT

ASF spreads the word

As part of its goal of developing global investor engagement with Australasian asset-backed securities, the Australian Securitisation Forum hosts an annual showcase in London. Taking place on 10 June this year, the event attracted a raft of institutional investors to hear more about the Australian housing market and securitisation product.

B I L L E VA N S W E S T PA C B A N K I N G C O R P O R AT I O N

“I do not expect a strong recovery in the housing market over the course of this year even though we are predicting one more rate cut from the RBA and given the surprise election result. Steady improvement is expected to strengthen into 2020, hence our call that rates will be on hold through 2020. It is important to emphasise the downside rate risks.”

TA PA S S T R I C K L A N D N AT I O N A L A U S T R A L I A B A N K

“There is fundamental-based support for the housing market in the form of higher population and wages growth, and lower unemployment, than there was a year ago. The picture isn’t positive enough for the RBA to be confident about inflation getting back to target and certainly rates will be cut. But it’s easy to forget some of the underlying factors around the economy and housing.”

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JAMES KANARIS W E S T PA C I N S T I T U T I O N A L B A N K

PETER CASEY ING AUSTRALIA

“There has not been a charge-off to any note in any Australian RMBS to date. I think this speaks to the strength afforded to transactions by factors such as the credit performance of Australian residential mortgages, excess spread and lenders’ mortgage insurance.”

“The main risk factor remains an increase in unemployment.

Underemployment is quite high, but at the end of the day borrowers will almost always continue paying their mortgage while they are employed.”

E VA Z I L E L I L AT I T U D E F I N A N C E A U S T R A L I A

“A master trust is excellent for programmatic issuers and has worked very well for Latitude – it was very well received by offshore investors in particular. But not many Australian ABS issuers have our scale of secured funding. It has been two years since we established our master trust and no-one has replicated it, so it’s difficult to see the impetus for others to follow.”

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RICHARD MCCARTHY P E R P E T U A L C O R P O R AT E T R U S T

“Australian issuers are definitely thinking about how they meet European investor requirements. Our analysis suggests the Australian market has more than 50 per cent direct alignment on the data requirements and, with some additional work, will be closer to 95 per cent aligned with European regulations.”

CULLEN HUGHES T H I N K TA N K C O M M E R C I A L P R O P E R T Y F I N A N C E

“We need to involve more investors for the market to support our growth and greater issuance in general. A wider range of collateral types will help spur investor interest. I can’t see this coming from the major or smaller banks, so I expect it will have to come from the nonbank sector.”

PA U L K O K N AT I O N A L A U S T R A L I A B A N K

“The fintech-lender space in Australia is growing. If this continues, over time we believe it will lead to more ABS issuance as lenders grow their books and start to look at capital markets as a funding option.”

TO D D L AW L E R BLUESTONE GROUP

“In anticipation of market-value decline in Australia, we limited LVR to 85 per cent many years ago and consequently have not seen significant deterioration in asset performance. We are watching some areas closely, though: mining towns in WA and Queensland have been widely discussed but other nonmetro areas or regions within capital cities may be affected by localised issues we as a lender need to understand.”

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IMRAN SHAFFI S TAT E S T R E E T

“We have been active in the Australian RMBS market for a decade or more. Certain factors have held true throughout that time, including the value of geographic diversity, strong underwriting and – for us – good performance especially compared with some of our European exposures over the same period.”

FIONA GAAL ANZ

M I C H A E L B AT H AUSTRALIAN OFFICE OF FINANCIAL MANAGEMENT

“The challenges in the housing market apply to ABS assets as well, whether it be households looking at buying a new car or furniture, or SME lending. It’s about having the confidence to invest for growth or to borrow. We are hoping lower rates will result in improved consumer sentiment, and either way we expect to see more ABS supply later in 2019.”

“The desire of the ABSF is to have a light touch in the market and not to distort pricing to the detriment of other investors. Success will be greatest if we catalyse investment from third parties. The key to this will be data – specifically the transparency of data we can help make available from secured and unsecured borrowers.”

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