1. No category

Australian Securitisation and Covered
Bond Seminar
Tokyo
1
18 September 2014
Agenda Overview
1.
Welcome
 Leonie Muldoon | Australian Senior Trade Commissioner | Austrade
 Chris Dalton | Chief Executive Officer | Australian Securitisation Forum
2
2.
Outlook for the Australian economy
3.
Outlook for Regional Property Markets
4.
Overview of Australian Residential Mortgage Market
5.
Australian RMBS and Covered Bonds Update
6.
Developments and outlook for the ABS market
National Australia Bank
Australian Economy
and Market Outlook
Cross-currents
Key Forecasts
3
•
Economy to grow 3-3½% over next two years.
•
Resource sector slowing but dwelling construction and exports improving.
•
House prices higher – not a problem yet.
•
RBA cash rate to start rising in late 2015.
•
$A to fall.
Peter Jolly. Global Head of Research
September 2014
Australia’s Exports: By destination and type
4
Commodity prices still falling.
But volumes of exports picking up.
5
Japan to be Australia’s largest trading
partner again?
- Free trade agreement signed in 2014 and LNG revolution beginning.
•
Australian gas market facing a transformational period ahead.
•
LNG gas expansion to begin in 2014/2015 as three large LNG export plants in Queensland come on stream.
•
A large share of the new offtake going to Japan.
Australian Historic & Forecast LNG Production
Browse FLNG
(??)
90
$50bn
80
$45bn
Pluto II (?)
$40bn
AP LNG (CSG)
70
60
$35bn
mtpa
$30bn
50
Australian LNG export
destinations
China
16%
Gladstone
(CSG)
Curtis Is. (CSG)
$25bn
40
Ichthys
$20bn
30
$15bn
Wheatstone
20
$10bn
Prelude
10
$5bn
Gorgon
0
$0bn
Japan
81%
South
Korea
3%
Taiwan
0%
Middle
East
0%
1999-00 2003-04 2007-08 2011-12 2015-16 2019-20
Source: ABARE, BREE, NAB Credit Research
6
Source: BP Statistical Review, 2014
Where is the economy at now? Forces
are mixed and growth near trend.
Positives





Low interest rates.
Strong growth in residential construction underway.
Strong population growth
Infrastructure expanding quickly.
Mining exports increasing.
Negatives




7
Mining investment falling.
$A too high.
Consumer cautious.
Fiscal policy tightening.
Australia economy has continued to grow.
We expect 3-3½% GDP growth ahead.
8
Drivers of GDP growth have changed
over past two years
Drivers of GDP Growth
Private consumption
moderate. Government
spending lower.
% point contribution to annual GDP
2.1
Private Consumption
1.5
Government Consumption
-0.3
0.4
2.9
Non Dwelling Investment
Exports
9
Jun-14
0.2
Dwelling Investment
Imports
Jun-12
0.8
Dwelling construction
improving as housing
market driven by price
increases and population
growth.
-0.6
-1.7
0.2
1.5
1.2
Investment falling as
mining investment
boom ending.
Reduced imports of
capital equipment
Exports to improve as
new resource sector
capacity comes
on stream
Business Conditions have improved.
10
Business Conditions Varied by Industry
Business Conditions by Industry
Source: National Australia Bank
20
15
10
NAB Survey
- 3mth m.a.
Jun-14
Jul-14
Aug-14
5
0
-5
-10
-15
-20
11
Mining
Manufa
cturing
Constr
uctioni
Retail
Whole Transport Services Household
Services
sale
Total
Mining investment falling.
Starting to see recovery in non-mining.
NAB
fcst
12
Consumers not as confident as businesses
13
Unemployment higher and weak
household income growth.
14
House prices still rising – especially Sydney.
Relative to incomes at 10 year average.
15
Australia’s Population has surged in
recent years. Will continue to grow.


Australia’s population grew 400k or 1.7% in 2013.
Population now 24 million and to be 30 million by 2030.
500
450
Australia's Population Growth
000's of people per year
400
350
300
250
200
150
100
50
0
16
1951 1957 1963 1969 1975 1981 1987 1993 1999 2005 2011
Population growth has outstripped
dwelling construction. Catching up now.
17
Weak wage growth means inflation
outlook benign.
18
RBA cash rate on hold. To rise late 2015.
RBA Forecast and Pricing
%
5.00
Nab Forecast
4.50
Mkt Pricing
4.00
3.50
3.00
2.50
2.00
Jun-09
Source:NAB
19
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
$A should be falling with commodity prices.
110
80
100
75
AUD TWI (RBA) , RHS
70
90
Forecasts
80
65
Index
Terms of Trade SA , LHS
70
60
60
55
50
50
40
45
1988
1990
1992
Source: National Australia Bank, Macrobond
20
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
$A being supported by strong fiscal
position and low global bond yields.
General Government Net Debt
- % of GDP
Greece
169
Japan
137
Portugal
120
Italy
112
France
89
United Kingdom
84
United States
82
Spain
66
Israel
Iceland
Germany
53
Canada1
Korea
Switzerland
New Zealand
Australia
16
Denmark
Sweden
Norway
-200
-100
Source: IMF Fiscal Monitor
21
0
100
200
Key Forecasts
Forecasts
Economics - yoy%
Household Consumption
Business Investment
Domestic demand
2013
2.0
-3.1
0.9
2014
2.6
-6.8
1.3
2015
2.8
-9.5
1.0
Net Exports (a)
Real GDP
1.9
2.4
1.9
3.2
1.9
3.1
CPI
Underlying Inflation
Wages
2.4
2.4
2.9
2.6
2.6
2.6
2.3
2.2
2.9
Terms of Trade
Unemployment rate (%)
Current Account - % GDP
Fiscal Balance* - % GDP
-4.0
5.7
-3.2
-1.3
-3.2
6.5
-2.0
-3.2
-1.2
6.2
-0.6
-1.8
Markets /Rates
RBA Cash
3 Year Swap
10 Year Swap
Now
2.5
3.0
3.9
10 year ACGB
Aus-US 10yr bond
Fed Funds Rate
US 10 Year Bond
3.6
106
0.3
2.5
3.5
95
0.25
2.50
3.6
80
0.25
2.75
3.7
70
0.25
3.00
3.9
60
0.50
3.25
4.3
75
1.00
3.50
4.3
75
1.00
3.50
AUD
0.92
0.90
0.88
0.86
0.85
0.82
0.82
AUD/NZD
AUD/JPY
AUD/EUR
AUD/CNY
1.11
98
0.71
5.6
1.10
95
0.69
5.6
1.10
95
0.69
5.4
1.10
95
0.68
5.3
1.10
95
0.67
5.2
1.12
96
0.66
5.0
1.12
96
0.66
5.0
Source: Bloomberg; NAB. * June fiscal year
a. contribution to annual GDP. Inventories and statistical discrepancy not show n
22
Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15
2.5
2.5
2.5
2.5
3.0
3.0
2.9
2.9
3.0
3.1
3.7
3.7
3.8
3.9
4.0
4.2
4.7
4.7
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23
Australian housing market update
Prepared and presented by Cameron Kusher, Senior Research Analyst RP Data
18 September 2014
Residential real estate absolutely underpins
Australia’s wealth position
Residential Real Estate
$5.5 Trillion
Australian
AustralianSuperannuation
Superannuation
$1.8
$1.5
Trillion
Trillion
(SMSF $543.4 Billion)
Commercial
Real Stocks
Estate
Australian
Listed
$0.7Trillion
Trillion
$1.6
Commercial
CommercialReal
RealEstate
Estate
$0.7
Trillion
$0.7
Trillion
As at end of August 2014
2
Source: RP Data, ASX, SPAA, PCA
Capital gain: Home values up 10.9% over past year
with the rate of growth accelerating once again
Rolling annual dwelling values, combined capital cities
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
Aug 98
Aug 00
Median Prices
$548,000
$467,500
3
Source: RP Data
Aug 02
Aug 04
Aug 06
Aug 08
Capital Gain
Houses
Units
Dwellings
Past 12 months
11.2%
9.0%
10.9%
Annual over five years
4.1%
3.6%
4.1%
Annual over ten years
4.8%
4.2%
4.7%
Aug 10
Aug 12
Aug 14
… Largely driven by strong conditions in Sydney
and Melbourne at the moment
Change in home values over time – Sydney vs. Melbourne vs. Brisbane vs. Perth
Sydney
Brisbane
Melbourne
Perth
600
500
400
300
200
100
Base 100 @ Jan-90
0
Aug-90
Aug-94
Aug-98
12 mth change in home values to Aug 2014
Australian Capitals
1.4%
Hobart
2.8%
Brisbane
11.7%
Source: RP Data
-1.4%
15.0%
9.9%
5.3%
Melbourne
16.2%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%
4
29.0%
Brisbane
5.4%
Sydney
21.5%
Adelaide
5.9%
Melbourne
33.9%
Perth
3.5%
Adelaide
Aug-14
Change in home values, Dec 2008 to Aug 2014
Darwin
5.4%
Perth
Aug-10
Canberra
Darwin
Hobart
Aug-06
Australian capitals
10.9%
Canberra
Aug-02
47.5%
Sydney
-10.0%
50.1%
0.0%
10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
… also by the strength of the high valued segment
of the market
Capital growth across different housing market segments
25.0%
Bottom 25%
20.0%
Middle 50%
Top 25%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
Aug-02
Aug-04
Aug-06
12 mth change in home values to Aug 2014
Top 25%
Middle 50%
Bottom 25%
Australian capitals
Perth
Aug-10
Perth
Brisbane
Brisbane
Melbourne
Melbourne
Sydney
Sydney
Source: RP Data
10.0%
15.0%
20.0%
Aug-14
Top 25%
Middle 50%
Bottom 25%
Australian capitals
Adelaide
5.0%
Aug-12
Change in home values, Dec 2008 to Aug 2014
Adelaide
0.0%
5
Aug-08
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Turnover: buyer demand appears to be levelling, but
transaction numbers are 9.9% higher than a year ago
Monthly house and unit sales, national
45,000
House sales (with 6 month moving avg)
40,000
35,000
30,000
25,000
20,000
15,000
10,000
Unit sales (with 6 month moving avg)
5,000
Jun 94
Jun 99
Jun 04
Annual Sales
Year to
June 2014
6
Year to
June 2013
% change
20.0%
348,670
315,723
10.4%
10.0%
Units
135,330
124,560
8.6%
0.0%
Source: RP Data
484,000
Jun 14
YoY % change in sales, states and territories
30.0%
Houses
Dwellings
Jun 09
440,283
9.9%
-10.0%
12.9%
14.8%
7.5%
21.3%
9.3%
0.3%
-0.2%
-1.3%
NSW
Vic
Qld
SA
WA
Tas
NT
ACT
0.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Aug-09
Weighted average clearance rate and number of auctions, combined capitals
3,500
3,000
2,500
2,000
1,500
1,000
500
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-13
Feb-14
Avg time on market, combined capitals
60
-4.0%
40
-6.0%
Source: RP Data
Feb-13
0
Aug-14
80
-2.0%
7
Aug-12
Avg vendor discount, combined capitals
-8.0%
Jul 06
4,000
Number of auctions
Clearance rate
Vendor metrics: clearance rates sitting at around 70%
while selling time and discounting rates have levelled
20
Jul 08
Jul 10
Jul 12
Jul 14
0
Jul 06
Jul 08
Jul 10
Jul 12
Jul 14
Rental markets are relatively soft while values rise…
Annual change in rents vs gross rental yield, combined capital cities
10.0%
Gross rental yield
Annual change in rents
8.0%
6.0%
4.0%
2.0%
0.0%
Aug-98
Aug-00
Aug-02
Aug-04
Aug-06
Aug-08
Annual change in rental rates
8
Source: RP Data
Aug-12
Aug-14
Gross rental yields
Sydney
Melbourne
Brisbane
Adelaide
Perth
Hobart
Darwin
Canberra
Sydney
Melbourne
Brisbane
Adelaide
Perth
Hobart
Darwin
Canberra
-6.0%
Aug-10
-4.0%
Houses
-2.0%
0.0%
2.0%
Units
4.0%
6.0%
0.0%
2.0%
Houses
4.0%
6.0%
Units
8.0%
Australian interest rates: going nowhere fast….
Official interest rates and mortgage rates over time
14.0%
Standard variable mortgage rates
3 yr fixed mortgage rates
Cash rate
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Sep-92 Sep-94 Sep-96 Sep-98 Sep-00 Sep-02 Sep-04 Sep-06 Sep-08
Average term deposit rates ($10,000)
6.0%
Sep-12
Sep-14
% of mortgages on a fixed rate
30.0%
5.0%
25.0%
4.0%
20.0%
3.0%
15.0%
2.0%
10.0%
1.0%
5.0%
0.0%
Aug-02
9
Sep-10
Aug-04
Source: RP Data
Aug-06
Aug-08
Aug-10
Aug-12
Aug-14
0.0%
Jul-94
Jul-98
Jul-02
Jul-06
Jul-10
Jul-14
Housing demand: population growth starts to ease
on lower overseas migration
Quarterly change in national population
10
Source: RP Data, ABS
Overseas and interstate migration has weakened
across Western Australia and Queensland
NSW
Natural
Increase
Net
Overseas
Migration
Net
Interstate
Migration
11
Source: RP Data, ABS
Vic
Qld
WA
Housing supply: dwelling approvals have recently
peaked after a solid ramp-up
Monthly number of dwelling approvals, national
20,000
Total dwelling approvals
18,000
Total dwelling approvals (6 month rolling avg)
16,000
14,000
12,000
10,000
8,000
Jul-84
Jul-89
Jul-94
Jul-99
National dwelling approvals, houses v units
15,000
10,000
5,000
0
Jul-84
12
Jul-89
Source: RP Data, ABS
Jul-94
Jul-99
Jul-04
Jul-09
Jul-14
Jul-04
Jul-09
Jul-14
Annual dwelling approvals by major capital
60,000
50,000
40,000
30,000
20,000
10,000
0
Jul-86 Jul-90
Sydney
Jul-94 Jul-98 Jul-02
Melbourne
Brisbane
Jul-06 Jul-10 Jul-14
Adelaide
Perth
Mortgage demand: The value of housing finance
commitments to both owner occupiers and
investors has recently levelled
Value of housing finance commitments, monthly, national
14.0
Owner occupier new loans
Owner occupier refinances
Investment
Total value ($b)
12.0
10.0
8.0
Investor loans
$11.5b
6.0
4.0
2.0
0.0
Jul-94
Jul-98
Jul-02
Jul-06
Jul-10
Jul-14
RP Data Mortgage Index, national
13
Source: RP Data, ABS
Owner
occupier loans
(excl. refi)
$11.8b
On a rolling annual basis, mortgage demand is still
increasing but at a slower pace
80.0%
Annual change in housing finance commitments vs. annual change in dwelling values
Annual growth in housing finance (ex refi)
Annual growth in property values
60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%
Jul-98
14
Source: RP Data, ABS
Jul-00
Jul-02
Jul-04
Jul-06
Jul-08
Jul-10
Jul-12
Jul-14
Investors represent a growing proportion of
mortgage demand
70.0%
Proportion of housing finance commitments by purpose
Owner occupier (ex-refi)
60.0%
Owner occupier (refi)
Investor
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Jul-94
Jul-98
Jul-02
Jul-06
Proportion of housing finance commitments by purpose
Vic
Qld
WA
Source: RP Data, ABS
Jul-14
Value of housing finance commitments by purpose
NSW
15
Jul-10
Investment properties are mostly concentrated in
the unit markets of Melbourne and Sydney
Sydney Houses
Sydney Units
Melbourne Houses
Melbourne Units
16
Source: RP Data
>50% 40-49% 30-39% 20-29% <20%
Consumer sentiment: slowly moving higher after
the post-budget slump in confidence
Consumer sentiment index
130
120
110
100
90
80
Consumer Sentiment Index
Six month rolling average
70
Aug-94 Aug-96 Aug-98 Aug-00 Aug-02 Aug-04 Aug-06
40.0%
Wisest place for savings
40.0%
35.0%
30.0%
30.0%
20.0%
25.0%
10.0%
20.0%
0.0%
15.0%
-10.0%
10.0%
-20.0%
5.0%
0.0%
Jun-98 Jun-00 Jun-02 Jun-04 Jun-06 Jun-08 Jun-10 Jun-12 Jun-14
Financial Institution
Shares
Real Estate
Pay Debt
Source: RP Data, ABS
Aug-08
Aug-10
Aug-12
Aug-14
Annual change in consumer
sentiment v dwelling values
-30.0%
-40.0%
Aug-98 Aug-00 Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12 Aug-14
Consumer sentiment
Capital city home values
Foreign investment – mountain from a molehill?
Where are the overseas residential real estate
dollars coming from?
Source: RP Data, FIRB, Juwai
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Source: RP Data, FIRB, Juwai
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Source: RP Data, FIRB, Juwai
Australian Mortgage Products vs. Japanese
And Other Markets
ASF Asian Investor Seminar in Tokyo
Hiroshi Sonoda
Director, Structured Finance Ratings
Standard & Poor’s Ratings Japan K.K.
September 18, 2014
本資料の一部、もしくは全部を書面による許可なくして転載および引用することを禁じます。Copyright ©
by 2014 Standard & Poor’s Financial Services LLC. All rights reserved.
Today’s topic
• Australian residential mortgage loan products
– Credit factors and characteristics of loan products
• U.S. and U.K. residential mortgages/RMBS
• Performance and Outlook
S&P の格付けについて：
スタンダード＆プアーズ・レーティングズ・サービシズが提供する信用格付には、日本の金融商品取引法に基づき信用格付業者と
して登録を受けているスタンダード＆プアーズ・レーティング・ジャパン株式会社が提供する信用格付（以下「登録格付」）と、当該
登録を受けていないグループ内の信用格付業を行う法人が提供する信用格付（以下「無登録格付」）があります。本稿中で記載さ
れている信用格付はすべて無登録格付です。なお、スタンダード＆プアーズ・レーティング・ジャパン株式会社が提供する信用格
付の一覧は同社の日本語ウェブサイト(www.standardandpoors.co.jp)の「ライブラリ・規制関連」で公表しています。
2
Australian Residential Mortgage Products
Key credit factors of Australian residential mortgage loans
• Full recourse to borrowers with stable income
• As lenders will actively pursue this right, if necessary, this affects a borrower's credit-risk consciousness and
payment behavior through the loan term.
• The majority of working Australians (about 80%) are salaried employees, a level that has remained the same
over the past decade
• Legal environment and credit culture
• The Australian legal environment is relatively more creditor friendly and offers a stronger enforcement regime
than the U.S.
• This reinforces the more conservative credit culture among Australian borrowers.
• Tax incentive
• The absence of tax deductions on Australian loans secured by owner-occupied homes motivates borrowers to
make partial repayments when possible, resulting in a rapid amortization of loan balances and increasing
borrower equity in their homes.
• Business model
• The originate-to-distribute model has not been a strong feature. Most originators in Australia typically assume
various roles in RMBS transactions, and are thereby closely aligned by their interests to the performance of the
transactions.
• Lenders’ Mortgage Insurance (LMI) is typically involved .
4
Lenders’ mortgage insurance (LMI)
• Many Australian prime RMBS are fully mortgage-insured under either a
primary or pool mortgage insurance policy.
• A primary policy LMI providers typically underwrite each loan individually.
• A pool policy is a policy taken out mainly for securitization purposes. It is underwritten on a pool
basis and generally where the loans have loan-to-value ratios below 80%.
• LMI providers are contracted to pay all valid claims under the LMI policy, but
claims may be adjusted (excluded from the policy or denied in case of fraud).
• In terms of underwriting practice, LMI providers have a strong motivation to
minimize loan losses, because of its 100% cover – first loss protection seller.
• Originators and servicers of RMBS perform within the LMI providers’
documented expectations so the claims can be met – contributing origination
and underwriting quality.
• High claims payout ratio of 90% by two dominant LMI providers for RMBS:
• QBE Lenders’ Mortgage Insurance Ltd. (AA-/Negative)
• Genworth Financial Mortgage Insurance Pty Ltd. (AA-/Stable)
5
Investment Property Loans (IPLs)
• Low interest rate environment is more
attractive for IPLs
• According to Australian Bureau of Statistics ,
the proportion of households with Other
Property Loan Debt (borrower does not live in
it) increased from 10% in 2003-2004 to 12% in
2011-2012
• Investing in property is a part of household
wealth building and management in Australia
(see ABS chart)
Source: Australian Bureau of Statistics
• IPLs tend to have a more speculative nature,
but the historical performance has been
relatively stable and in some case outperformed Non-IPLs (see Westpac chart)
• Proportion of IPLs in pools backing RMBS
roughly range between 15% to 35% depending
on the lender
Source : Westpac
6
IPLs tend to be distributed to higher worth, higher income middle age
households and tend to be in dual income households
Source: Australian Bureau of Statistics
7
Borrower characteristics
S&P’s Archetypical Residential Mortgage Loan Pool (1)
Australia
Japan (Proposed methodology)
Borrower characteristics
- Employment status
Pay-as-you-go (PAYG) employees
Salaried employee or professional (not self-employed)
- Underwriting standards/credit history
Credit check obtained and borrower has a
clear credit history
Credit check obtained and borrower has a clear credit
history
- Current loan performance status
Loan is currently performing and not
delinquent
Loan is currently performing and not delinquent
- Status of residence/citizenship
Australian resident
Japanese citizen or permanent resident
- First-time buyer
Borrower is not a first-time buyer
Not applicable under the proposed methodology
- Type of occupancy
Owner-occupier
Owner-occupier
- Age
Not applicable under the criteria (considered
under the above employment status and
also affordability fully verified)
Not applicable under the proposed methodology
(considered under the above employment status and
also affordability fully verified)
Source: Standard & Poor’s
Factors of expected stability of borrower’s income
• Full/part-time PAYG > Pension/Over 65 > Commission-based > PAYG-casual > Unemployed
• Self-employed: longer years of self-employment > shorter years
• First-time buyer: limited payment history
8
Loan characteristics
S&P’s Archetypical Residential Mortgage Loan Pool (2)
Australia
Japan (Proposed methodology)
- Security
First-registered mortgage over freehold land or crown
leaseholds with a lease term of at least 15 years longer
than the loan term
First registered mortgage over the underlying property (or through a
guaranty company)
- Loan-to-value (LTV) ratio
75%
75%
- Income verification and Debt-to-income
(DTI) ratio
Income and affordability fully verified (Full Doc)
Income is fully verified and annual repayment not to exceed 35% of
gross annual income
- Savings history
Borrower's deposit money (or savings history) are
verified
Not applicable under the proposed methodology
- Interest rate
Standard discretionary variable rate (without interestonly period)
Fixed
- Repayment terms
Fully amortizing 30-year loan with even and regular
loan installments
Fully amortizing (up to) 35-year loan with even and regular loan
instalments
- Loan seasoning
Less than 5 years seasoned
Less than 5 years seasoned
- Loan size
Not applicable under the criteria (see LTV and max.
property value)
Not applicable under the proposed methodology
Loan characteristics
Source: Standard & Poor’s
9
•
LTV: a key predictor of default
•
Documentation standards: the borrower's income and affordability (= capacity to pay), as well as assets (= savings
history) are fully verified vs. Low-Doc or No-Doc.
•
Repayment method: Interest-only period (typically up to 5 years. penalty for all IO periods. )
•
Loan term/seasoning: positive adjustment factor
Security property characteristics
S&P’s Archetypical Residential Mortgage Loan Pool (3)
Australia
Japan (Proposed methodology)
- Diversification
Geographical diversity, such as state, region,
nonmetropolitan, and postcode
Geographical diversity, such as prefecture and postcode
- Insurance
Full general insurance over security property,
including appropriate cover for
geographically specific risks, such as
earthquakes
Group credit life insurance
- Property type
Residential property -- detached, semidetached, townhouses, strata-title flats,
apartments, and units (excluding highdensity apartments and hobby farms)
No specified under the proposed methodology, but
residential property
- Property valuation
Full valuation (or appraisal) of security
property at time of approval
Sales price of new purchase or desktop appraisal
through loan underwriter's comparative analysis
- Max. property value
Maximum property value A$1,000,000
Maximum property value JPY100,000,000
Security property characteristics
Source: Standard & Poor’s
• Property type: the value of inner city apartments in Australia can be volatile due to
lower market liquidity (i.e. Loss Severity) and borrowers may be more motivated by the
prospect of short-term capital gain (i.e., Foreclosure Frequency).
• High-value security properties (with value of greater than A$1 million): may be exposed
to a higher degree of resale value volatility due to the narrower range of prospective
purchasers (i.e., Loss Severity)
10
S&P-rated RMBS portfolio characteristics
Portfolio Characteristics Of Collateral Underlying Australian RMBS As Of June 2014
Prime
Subprime And
Nonconforming
97.6%
2.4%
2.6%
7.6%
2.7%
Weighted Average LTV
61.4%
70.4%
61.7%
% Above 75% LTV
32.5%
48.9%
32.9%
% Above 90% LTV
5.2%
7.6%
5.3%
63
42
63
2.3%
40.5%
3.2%
21.8%
24.7%
21.9%
Proportion Of Total RMBS
Loans > A$750,000
Weighted Average Seasoning (Months)
Income Partially Verified
Prepayment Rate
Source: Standard & Poor’s
11
Weighted Average
U.K. and U.S. Residential Mortgages/RMBS
U.K. Residential Mortgage/RMBS
• Market Trends
• U.K. investor-placed RMBS issuance decline sharply in 2013 to € 5.3 bil, down 80% compared with
2012 and more than 90% since 2006. But Mortgage lending has been increasing since mid-2013.
• New mortgage rules
• Affordability and Income Stress Test under new regulation
• For I/O loan, lender must assess affordability on a capital and interest, unless there is a clearly
understood and believable alternative source of capital repayment, which led to the reduction of I/O
loans
• Master trust structure
• Most of the UK prime RMBS are issued from master trust structures.
• Ongoing sale of the assets to the programme (subject to conditions aiming to control the credit quality
of the pool)
• RMBS Performance
• We expect U.K. house prices to increase by 7.0% in 2014, before decelerating to 4.5% in 2015.
• On the back of strong economic performance, delinquencies declined further in all of our residential
mortgage-backed securities (RMBS) indexes. Delinquencies of 90 days and above in our rated prime
and buy-to-let (BTL) transactions fell to their lowest levels since 2008, to 1.88%, and to 2.82%,
respectively.
13
U.K. Residential Mortgage/RMBS
Low Interest Rates Are Underpinning Europe’s House Price Recovery, July 28, 2014
14
U.S. Residential Mortgages/RMBS
• Market Trends
• Most loans originated today are ultimately sold to government sponsored entities (Fannie Mae and
Freddie Mac) who then issue securities backed by the mortgage loans
- This promotes the availability of the 30-year fixed rate mortgage product to consumers (a ‘staple’ in the U.S.)
- Underwriting requirements have been high and it is more difficult to qualify for a Fannie/Freddie loan today than it
was years ago
• Federal Housing Administration (FHA) also make-up a good portion of mortgage originations
• Housing starts in the U.S. on an annualized basis have been near one-million
• First-time homebuyers have decreased compared to historical norms as more cash buyers have been part
of the market and other factors (student loan debt, difficulty in obtaining a mortgage) deter purchases for
first timers
• Inventories of distressed properties from the housing downturn have been declining, and home-prices
have seen double-digit growth over the last several years
• Regulatory Changes
• Introduction of Qualified Mortgages (QM) earlier in 2014 provides that loan originators provide “ability
to repay” standards in order to avoid certain recourse to the lender
- Deters origination of mortgages with interest only features and high debt-to-income ratios
- We have observed little non-QM origination since the rule went into effect January 10, 2014
• RMBS Performance
• Legacy RMBS have continued to experience improving collateral performance as loans season and
macro-economic conditions improve
15
U.S. Residential Mortgage/RMBS
A Resilient Housing Market And Economic Momentum Buttress U.S. RMBS, May 30, 2014
16
Performance and Outlook of Australian RMBS
Australian House Prices
18
Strong performance of prime RMBS
Source: Standard & Poor’s
Source: Standard & Poor’s
Strong performance
• Relatively low level of unemployment rate
• No material drop in house price
Higher prepayment rate in Australian mortgages
• possible factors including mobility, interest rate environment, housing price, as well as tax
system
19
Key credit factors of Australian residential mortgage loans
• We expect most Australian RMBS transactions to remain stable in 2014. This outlook is based on our
expectation that collateral performance will remain stable and credit enhancement will continue to build up
in percentage terms as the underlying asset pools pay down.
• Prime arrears continue to trend downwards which largely reflects the progressive lowering of interest rates
by the RBA over the last 12 months. As the majority of loans underlying Australian RMBS portfolios are now
variable rate, movements in interest rates have a more direct impact on arrears performance.
• Lo-Doc loans arrears performance reflects the greater vulnerability of these borrowers, who are mostly self
employed, to cash flow pressures in subdued economic conditions compared to their Full-Doc counterparts.
• The subordinated classes of Australian prime RMBS that have a high dependency on LMI are likely to
remain sensitive to any changes in the financial strength ratings of LMI providers.
• Stresses in certain industry sectors could also have a flow-on effect on the household sector and affect the
credit conditions for the RMBS sector. Specifically an increase in unemployment, weakening household
income, and dampening consumer sentiment could cause the housing market to become more subdued,
property prices to decrease, and the housing loan consumer finance serviceability of some borrowers to
come under pressure.
• We believe senior classes of Australian RMBS notes are well positioned however to absorb the impact of
such downside scenarios, due to a buildup of borrower equity for seasoned transactions, significant credit
enhancement provided at close, and the continued buildup of credit enhancement in percentage terms for
most RMBS notes due to sequential principal allocation.
20
Copyright © 2014 by Standard & Poor’s Financial Services LLC. All rights reserved.
本稿に掲載されているコンテンツ（信用格付、信用関連分析およびデータ、バリュエーション、モデル、ソフトウエア、またはそのほかのアプリケーションもしくはそのアウトプットを含む）及びこれらのいかなる部分(以下「本コンテンツ」と
いいます。)について、スタンダード＆プアーズ・ファイナンシャル・サービシズ・エル・エル・シーまたはその関連会社（以下、総称して「スタンダード＆プアーズ」）による事前の書面による許可を得ることなく、いかなる形式あるいは手段
によっても、修正、リバースエンジニアリング、複製、頒布を行うこと、あるいはデーターベースや情報検索システムへ保存することを禁じます。本コンテンツを不法な目的あるいは権限が与えられていない目的のために使用すること
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用可能性について保証いたしません。スタンダード＆プアーズ関係者はいずれも、原因が何であれ、本コンテンツの誤謬や脱漏（過失であれその他の理由によるものであれ）、あるいは、本コンテンツを利用したことにより得られた結
果に対し、あるいは利用者により入力されたいかなる情報の安全性や維持に関して、一切責任を負いません。 本コンテンツは「現状有姿」で提供されています。スタンダード＆プアーズ関係者は、明示または黙示にかかわらず、本
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げられることがないこと、または、本コンテンツがいかなるソフトウエアあるいはハードウエアの設定環境においても作動することについての保証を含む一切の保証をいたしません。いかなる場合においても、スタンダード＆プアーズ
関係者は、損害が生じる可能性について報告を受けていた場合であっても、本コンテンツの利用に関連する直接的、間接的、付随的、制裁的、代償的、懲罰的、特別ないし派生的な損害、経費、費用、訴訟費用、損失（損失利益、
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本コンテンツにおける、信用格付を含む信用関連などの分析、および見解は、それらが表明された時点の意見を示すものであって、事実の記述ではありません。スタンダード＆プアーズの意見、分析、格付けの承認に関する決定
（以下に述べる）は、証券の購入、保有または売却の推奨や勧誘を行うものではなく、何らかの投資判断を推奨するものでも、いかなる証券の投資適合性について言及するものでもありません。スタンダード＆プアーズは、本コンテン
ツについて、公表後にいかなる形式やフォーマットにおいても更新する義務を負いません。本コンテンツの利用者、その経営陣、従業員、助言者または顧客は、投資判断やそのほかのいかなる決定においても、本コンテンツに依拠し
てはならず、本コンテンツを自らの技能、判断または経験に代替させてはならないものとします。スタンダード＆プアーズは「受託者」あるいは投資助言業者としては、そのように登録されている場合を除き、行為するものではありませ
ん。スタンダード＆プアーズは、信頼に足ると判断した情報源から情報を入手してはいますが、入手したいかなる情報についても監査はせず、またデューデリジェンスや独自の検証を行う義務を負うものではありません。
ある国の規制当局が格付け会社に対して、他国で発行された格付けを規制対応目的で当該国において承認することを認める場合には、スタンダード＆プアーズは、弊社自身の裁量により、かかる承認をいかなる時にも付与、取り
下げ、保留する権利を有する。スタンダード＆プアーズ関係者は、承認の付与、取り下げ、保留から生じる義務、およびそれを理由に被ったとされる損害についての責任を負わないものとします。
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利を留保しています。スタンダード＆プアーズの公開信用格付と分析は、無料サイトのwww.standardandpoors.com、そして、購読契約による有料サイトのwww.ratingsdirect.comおよびwww.globalcreditportal.com で閲覧できるほか、スタン
ダード＆プアーズによる配信、あるいは第三者からの再配信といった、他の手段によっても配布されます。信用格付手数料に関する詳細については、www.standardandpoors.com/usratingsfeesに掲載しています。
日本
S&Pの格付けについて： スタンダード＆プアーズ・レーティングズ・サービシズが提供する信用格付には、日本の金融商品取引法に基づき信用格付業者として登録を受けているスタンダード＆プアーズ・レーティング・ジャパン株式会
社が提供する信用格付（以下「登録格付」）と、当該登録を受けていないグループ内の信用格付業を行う法人が提供する信用格付（以下「無登録格付」）があります。本稿中で記載されている信用格付のうち「※」が付されている信用
格付は無登録格付であり、それ以外は全て登録格付です。なお、スタンダード＆プアーズ・レーティング・ジャパン株式会社が提供する信用格付の一覧は同社の日本語ウェブサイト(www.standardandpoors.co.jp)の「ライブラリ・規制関
連」で公表しています。
Australian RMBS & Covered Bond
Update
18 September 2014
Panel Participants
Speaker
Position
Organisation
Director, Securitisation Originations
National Australia Bank
Peter Casey
Deputy Treasurer
ING Bank
Russel Parentela
Global Head of Mortgages
Bloomberg
Tim Hughes
Treasurer
Suncorp Bank
Guy Volpicella
Executive Director
Head of Structured Funding & Capital
Westpac Banking Corporation
Jennifer Wu
Vice President
Moody’s Investors Service
Moderator
Lionel Koe
Panel Participants
2
AUS RMBS Issuance Volumes
Australian RMBS Issuance (A$m)
70,000
60,000
50,000
40,000
30,000
20,000
10,000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: NAB & Bloomberg
Domestic

3
Foreign Currency (AUD equiv.)
AOFM Investment
1st September 2014, total RMBS issuance of A$20.1b compared to
A$17.8b (year on year)
2014
(YTD)
AUS RMBS Issuance Volume
A$M
Equiv.
Aussie RMBS Issuance
PRIME RMBS Outstanding^
30,000
Source: NAB, Bloomberg
Total outstanding
A$74.8
Total %
Total AUD
A$66.6
89%
Total offshore currency
A$8.2
11%
Major bank
A$26.4
35%
Other ADI
A$36.5
49%
Non bank
A$11.8
16%
25,000
20,000
15,000
10,000
5,000
2008
Big 4 ADI
2009
2010
Regional and Large ADIs
Source: NAB & Bloomberg
4
2011
2012
2013
Other ADIs
YtD2013 YtD2014
Non ADIs
Source: NAB & Bloomberg
Australia – Covered Bond Issuance
AUD Equiv.
Mill
Australian Bank* Covered Bond Issuance
45,000
2012, 2013 & YTD Covered Bond Issuance
AUD Equiv.
Mill
16,000
Source: NAB, Bloomberg
40,000
14,036
14,000
2012
35,000
30,000
2013
12,000
2014
9,690
10,000
25,000
8,964
20,000
8,000
15,000
6,000
7,798
5,124
10,000
3,896
4,000
5,000
Source: NAB, Bloomberg
4,085
5,391
5,159 4,814
4,254
2,200
1,902
2,000
-
Jan Feb Mar Apr May Jun
* inlcudes offshore subsidiaires
Source: NAB & Bloomberg
5
Jul Aug Sep Oct Nov Dec
0
ANZ
CBA
Source: NAB & Bloomberg
NAB
WBC
SUN
RMBS Spreads & relativities
180
Last AOFM RMBS
170
Purchase
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
Jul 11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14
3yr major bank secondary
mid levels (3mBBSW)
6
5yr major bank secondary
levels (3mBBSW)
ADI prime RMBS senior triple-A
primary spreads (1mBBSW)
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
Nonbank prime RMBS senior triple-A
primary spreads (1mBBSW)
7
Source: Moody's Investors Service
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Jun-08
Feb-12
Jun-12
Oct-12
Feb-13
Dec-12
Mar-13
Jun-13
Jun-14
Mar-14
Dec-13
Jun-14
Feb-14
Oct-13
Jun-13
Oct-11
Sep-12
Sep-13
Jun-11
Jun-12
Oct-10
Jun-10
Feb-10
Oct-09
Jun-09
Feb-09
Oct-08
Mar-12
Non-ADI
Feb-11
Austalian RMBS30-PlusDelinquencies(By Issuer Type)
Dec-11
Sep-11
Jun-11
Other ADI
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Regional ADI
Dec-09
Feb-08
Oct-07
Jun-07
Feb-07
Oct-06
Jun-06
Feb-06
Oct-05
Jun-05
Feb-05
Oct-04
Jun-04
Feb-04
Oct-03
Jun-03
Feb-03
Oct-02
Jun-02
Feb-02
60-90
Sep-09
Jun-09
Jun-01
Oct-01
90+
Mar-09
Dec-08
Sep-08
Major Bank
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
% of Current Balance
2.0%
1.8%
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
Sep-04
Jun-04
% of Current Balance
Australian RMBS Arrears Performance
Australian Prime RMBSDelinquencies
30-60
RMBS Performance (pre-LMI Loss)
RMBS Cumulative Losses by Deal Vintage
Jun-2013 (Pre-LMI)
Dec-2013 (Pre-LMI)
Jun-14 (Pre-LMI)
Jun-2013 (Post -LMI)
Dec-2013 (Post -LMI)
Jun-14 (Post -LMI)
0.60%
% of Original Balance*
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
•Calculation is based on the outstanding transactions.
Source: Moody's Investors Service

8
To date, no prime Australian RMBS note has experienced a note charge-off
2011
2012
9
Source: Moody's Investors Service
0.00%
May-14
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
UK
Sep-09
May-09
Jan-09
Aust ralia
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
Sep-05
May-05
Jan-05
Sep-04
May-04
Jan-04
% of Current Balance
Arrears Performance (Aust, UK and Dutch)
RMBS 60+ Days Delinquency
Net herlands
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
Typical Prime RMBS Capital Structure
Senior
Tranche
(≈92%)
• Triple-A Rated
• Credit support: AAA/Aaa LMI Independent with credit
support usually exceeding rating agency requirements
Mezzanine
Tranche
(5% to 6%)
• Triple-A Rated
• Credit support: sized based on triple-A loss expectation
after accounting for lenders’ mortgage insurance
• Credit support typically ranges from 2% to 3%
Subordinate
Tranche
(2% to 3%)
10
• Rating linked to lenders’ mortgage insurance provider and
notes sub-tranched from AA- to Not Rated
Principal Waterfall
11
Pool Comparison – Recent Issuance
12
Issue Date
Issue Volume
Pool Summary
Avg. Housing Loan Balance
(A$)
W.Avg. Seasoning
W.Avg. Current LVR
>80% Current LVR
Maximum Current LVR
Investment Loans
Full Doc Loans
Interest Only Loans
Fixed Rate Loans
Mortgage Insurance
Geographic Distribution
NSW
VIC
QLD
WA
SA & NT
TAS
ACT
Credit Support
S&P AAA (sf) Pre LMI
Actual Class A Initial Credit
Support
Source: S&P
SMHL
2014-1
Jully-14
$1,450m
PUMA
2014-2
July-14
$1,000m
Firstmac
1A-2014
Jun-14
$750m
IDOL
2014-1
Jun-14
$1,250m
WST
2014-1
Jun-14
$2,500m
PROGRESS
2014-1
Mar -14
$1,000m
261,164
159,286
294,949
293,428
282,779
261,015
292,825
31.9 mths
60.6%
5.7%
95.0%
25.2%
100.0%
19.5%
13.6%
15.5%
57.5 mths
63.3%
19.8%
95.0%
21.0%
100.0%
12.9%
22.6%
100.0%
18.0 mths
65.9%
16.9%
92.0%
25.0%
100.0%
25.0%
22.4%
100.0%
26.4 mths
67.0%
15.7%
94.9%
37.7%
100.0%
44.4%
2.9%
61.9%
27.5 mths
66.0%
11.5%
89.8%
18.4%
100.0%
14.3%
18.4%
100.0%
37.1 mths
62.1%
11.8%
95.0%
22.3%
100.0%
24.9%
21.0%
12.9%
36.2 mths
65.5%
11.4%
92.4%
29.5%
100.0%
47.4%
27.4%
100.0%
30.0%
29.0%
18.2%
12.7%
5.9%
2.7%
1.5%
22.7%
28.3%
14.9%
12.0%
6.7%
5.2%
10.2%
38.2%
26.0%
17.9%
8.4%
4.7%
1.5%
3.2%
30.4%
20.8%
29.6%
6.9%
8.0%
0.5%
3.8%
41.4%
22.1%
12.2%
9.4%
9.3%
1.2%
4.3%
33.2%
26.4%
16.8%
14.9%
5.1%
1.2%
2.3%
39.0%
21.6%
16.3%
13.5%
6.7%
0.7%
2.4%
4.8%
5.5%
5.9%
10.7%
4.5%
5.1%
6.9%
8.0%
8.0%
8.0%
15.0%
8.0%
8.0%
8.0%
MEDALLION
2014-2
Aug-14
$4,000m
Developments and outlook for ABS
18 September 2014
Panel Participants
Speaker
Position
Organisation
Chief Executive Officer
Australian Securitisation Forum
Sarah Hofman
Managing Director
Head of Primary Markets, Australia
The Royal Bank of Scotland
Vera Chaplin
Managing Director, Structured Finance
Standard & Poor’s Ratings Services
Guy Volpicella
Executive Director
Head of Structured Funding & Capital
Westpac Banking Corporation
Moderator
Chris Dalton
Panel Participants
2
Australian Asset Backed Securities
Issuance 2013 and 2014
Australian ABS Issuance Volume Analysis (2013 – 14YTD)
Australian Senior AAA Tranche ABS Deals – Spread Analysis
Assumed CCS Optionality & Credit Charge on Foreign Denominated tranches: 20 bps; Average Senior Tranche WAL – Average: 1.7 years; Range Senior Tranche WAL: 0.85 years to 2.5 years
Source: Dealogic
3
Australian Asset Backed Securities
Issuance 2013 and 2014
Senior AAA Tranche ABS Deals
Tranche Value
(USDm)
Currency
Coupon
1-mth BBSW
Spread Eqv.
Wt Avg. Life (yrs)
Flexi ABS Trust 2014-1
101
AUD
1-mth BBSW +100bps
100
1
05-Jun-14
SMART ABS Series 2014-2E Trust
519
AUD
3-mth BBSW +80bps
88
2
05-Mar-14
SMART ABS Series 2014-1US Trust
40
USD
1-mth Libor +30bps
46
1
12-Dec-13
Crusade ABS Series 2013-1
765
AUD
1-mth BBSW +80bps
80
3
14-Nov-13
Driver Australia One Trust
403
AUD
1-mth BBSW +85bps
85
1
07-Nov-13
Liberty Series 2013-1 Auto ABS
107
AUD
1-mth BBSW +120bps
120
2
27-Sep-13
SMART ABS Series 2013-3 Trust
391
AUD
3-mth BBSW +95bps
103
2
06-Sep-13
IMPALA Trust No 1 Sub-Series 2013-1
183
AUD
1-mth BBSW +105bps
105
2
30-Aug-13
Flexi ABS Trust 2013-2
101
AUD
1-mth BBSW +120bps
120
1
29-Aug-13
BPI No 1 Pty Ltd
242
AUD
3-mth BBSW +215bps
223
9
10-Jul-13
CNH Capital Trust Series 2013-1
249
AUD
3-mth BBSW +110bps
118
2
18-Jun-13
Flexi ABS Trust 2013-1
146
AUD
1-mth BBSW +120bps
120
1
16-May-13
Series 2013-1 REDS EHP Trust
714
AUD
1-mth BBSW +100bps
100
1
15-May-13
SMART ABS Series 2013-2US Trust
143
USD
1-mth Libor +25bps
41
1
16-Jan-13
SMART ABS Series 2013-1US Trust
70
USD
1-mth Libor +27bps
43
1
Pricing Date
Issuer
20-Jun-14
Source: Dealogic
4
ABS Performance

Global ABS ratings performed strongly through the downturn

Australian ABS rating upgrades outweighed downgrades reflecting strong collateral
performance and supportive transaction structures

Sequential-pay of rated securities resulting in faster build up of credit enhancement as
a percentage of outstanding balance relative to loss experience

Standard & Poor’s expects ABS performance outlook to be stable and able withstand
moderate economic downturn
5
ABS exhibited stronger performance in
softer economic conditions
6
Aust./NZ ABS ratings performance reflect concentration
in Auto and equipment – ABS Performance
Source: Standard & Poor’s
Copyright: Standard & Poor’s 2014
7
Australian Auto & Equipment ABS: Loss Coverage
Growing Faster Than Increase in Losses
Pool factor (% )
Cumulative net
loss (% )
Current credit
support available
to most senior note
(% )
CNH Capital Australia Receivables Trust Series 2011-1
21.4
0.9
41.0
CNH Capital Australia Receivables Trust Series 2013-1
61.2
0.4
21.7
Driver Australia One Trust
71.4
0.1
19.9
IMPALA Trust No. 1 - Sub Series 2011-1
16.4
0.3
24.8
IMPALA Trust No. 1 - Sub Series 2012-1
42.8
0.3
15.0
IMPALA Trust No. 1 - Sub Series 2013-1
75.2
0.0
11.2
Liberty Series 2011-1 Auto
23.9
1.6
53.5
National ABS 2012-1M
28.8
0.2
16.8
Source: Standard & Poor’s, Data as at June 2014
Copyright: Standard & Poor’s
8
Australian Auto & Equipment Cumulative Net
Losses By Originator (Paid Down Transactions)
9
Australian Auto & Equipment Cumulative Net
Losses – On Selected Active Transactions
Source: Standard & Poor’s
Copyright: Standard & Poor’s 2014
10
Auto-ABS Collateral Performance
11
Australian ABS and RMBS Collateral
Performance
12
Crusade ABS Programme
 Westpac is the only major Australian bank with an active Auto
ABS programme
– Crusade ABS 2012-1 transaction launched 2012 –
Westpac’s first auto ABS transaction since the Westpac /
St. George merger in 2008
– Second transaction launched 2013
Deal
Crusade ABS 2013-1
Crusade ABS 2012-1
(Dec 13)
(Dec 12)
(Issue Date)
Size
$1.0bn
$1.2bn
‘AAA’ Credit Enhancement
16%
15%
Collateral
Auto: 100%
Auto: 100%
Number of Contracts
52,309
59,609
W.A. Yield
11%
11%
 Re-establishing the auto ABS programme has enabled
Westpac to further diversify its sources of wholesale funding
and access a range of domestic and offshore investors
W.A. Seasoning (mth)
22
19
W.A. Remaining term (mth)
39
41
W.A. Balloon
8%
8%
 Crusade 2012-1 and 2013-1 priced at or inside major bank
RMBS transactions (a first for the market):
– 2012-1: 1M BBSW + 100bp (2.5year WAL) vs.
NAB RMBS: 1M BBSW + 110bp
– 2013-1: 1M BBSW + 80bp (2.5 year WAL) vs.
CBA RMBS: 1M BBSW + 80bp
% of Pool with Balloon
31%
32%
New vs. Used
New: 70%
New: 69%
Used: 30%
Used: 31%
19,117
20,131
 The programme has many features that appeal to investors:
– 12 month revolving period (the only Australian ABS
programme to have this feature) to increase duration
– Granular portfolio with predictable default performance
– High levels of subordination (15-16%) to AAA notes
– Low prepayment sensitivity
– Relatively high portfolio yield leading to high excess spread
13
Average Loan Size (A$)
Investor Distribution
Supranational /
Govt.
6%
Fund Manager
8%
Insurance
3%
Offshore Bank
64%
Local Bank
19%
14
Bank RMBS (2.5 – 3.5 year WAL)
Medallion 14-2
SMHL 14-1
1H 2014
PUMA 14-2
40
IDOL 14-1
Crusade
ABS 2013-1
WST 14-1
Progress 14-1
2H 2013
Torrens 14-1 A
60
Puma 14-1 A
Driver
Australia One
Medall 14-1 A1
SMHL 13-1 A
WST 13-2 A
PUMA 13-1 A
Progress 13-1 A
1H 2013
IDOL 13-2 A1
Crusade
ABS 2012-1
Medall 13-2 A1
Reds 13-1 A1
Torrens 13-1 A
Apollo 13-1 A
120
IDOL 13-1 A1
SMHL 12-1 A-1R
2H 2012
Medall 13-1 A1
WST 13-1 A
Torrens 13-1 A
National 12-2 A1
Reds 12-1E A1
IDOL 12-2 A2
80
SMHL 12-2 A1
Apollo 12-1 A
Progress 12-2 A
Medall 12-1 A
Relative RMBS and ABS Pricing
RMBS and ABS Pricing
180
160
140
REDS EHP
2013-1
100
SMART
2014-1E
20
0
2H 2014
15
Bank RMBS (2.5 – 3.5 year WAL)
Medallion 14-2
SMHL 14-1
1H 2014
PUMA 14-2
IDOL 14-1
WST 14-1
Progress 14-1
2H 2013
Torrens 14-1 A
Puma 14-1 A
Medall 14-1 A1
SMHL 13-1 A
WST 13-2 A
PUMA 13-1 A
1H 2013
Progress 13-1 A
40
IDOL 13-2 A1
Medall 13-2 A1
Reds 13-1 A1
Torrens 13-1 A
Apollo 13-1 A
IDOL 13-1 A1
SMHL 12-1 A-1R
2H 2012
Medall 13-1 A1
WST 13-1 A
Torrens 13-1 A
National 12-2 A1
Reds 12-1E A1
IDOL 12-2 A2
SMHL 12-2 A1
Apollo 12-1 A
Progress 12-2 A
Medall 12-1 A
Relative RMBS and ABS Pricing
RMBS and ABS pricing compared to 3 year unsecured pricing
180
160
140
120
100
80
60
Major Bank 3 Year
Unsecured Margin
20
0
2H 2014
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Australian RMBS Cumulative Losses Before LMI Payout
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We use words such as ‘will’, ‘may’, ‘expect’, 'indicative', ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘probability’, ‘risk’, ‘forecast’, ‘likely’, ‘estimate’, ‘anticipate’, ‘believe’, or
similar words to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to change, certain risks, uncertainties and
assumptions which are, in many instances, beyond our control and have been made based upon management’s expectations and beliefs concerning future developments and their
potential effect upon us. Should one or more of the risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from the
expectations described in this presentation. Factors that may impact on the forward-looking statements made include those described in the section entitled ‘Risk factors’ in Westpac’s
Interim Financial Report for the half year ended 31 March 2014 available at www.westpac.com.au. When relying on forward-looking statements to make decisions with respect to us,
investors and others should carefully consider such factors and other uncertainties and events. We are under no obligation, and do not intend, to update any forward-looking statements
contained in this presentation.
Thank you for attending!
For further information, please visit:
www.securitisation.com.au
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