NONBANK MYTHBUSTING - KangaNews
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
N O N B A N K Y E A R B O O K
OCT/NOV 19 SUPPLEMENT_ VOL 14 ISSUE 115
www.kanganews.com AUSTRALASIAN FIXED INCOME: GLOBAL REACH, LOCAL EXPERTISE
NONBANK
MYTHBUSTING
As Australasia’s nonbank lenders continue to grow market share,
the issuers are spreading the word in global funding markets about
their asset performance and credit standards
PREMIUM PARTNERS:
SUPPORTING PARTNERS: ASSOCIATE PARTNERS:
Pepper’s
offerings go well
beyond RMBS.
With no BS.
Pepper is utterly reliable, regularly in market –
and we tell it like it is. And we’re so much more than
one of Australia’s leading RMBS providers.
For the full suite of Pepper debt offerings,
contact Andrew Twyford +61 401 039 700 or
Steven Fischer +61 413782557. Challenge
Pepper Group Limited ACN 094 317 665, Australian Credit Licence Number 286655, is the servicer of home and personal loans made
by Pepper Finance Corporation Ltd ACN 094 317 647. Pepper Asset Finance Pty Ltd ACN 165 183 317 Australian Credit Licence
458899 is the lender for Pepper Money car loans.
the accepted
KangaNews
SUPPLEMENT TO
OCT/NOV 2019 EDITION
VOLUME 14 ISSUE 115
www.kanganews.com
Head of content and editor
Contents
LAURENCE DAVISON
ldavison@kanganews.com
Senior staff writer
MATT ZAUNMAYR
mzaunmayr@kanganews.com
4
Staff writer
CHRIS RICH
crich@kanganews.com
Head of commercial FE ATU R E
JEREMY MASTERS
jmasters@kanganews.com Nonbank mythbusting
Sales support officer
YAZZY MCGUID
The nonbank lending sector represents a significant portion
ymcguid@kanganews.com of the Australian securitisation market. While the volume
and frequency of deals indicates an increasing level of
Head of operations
HELEN CRAIG investor comfort with the sector, myths pertaining to
hcraig@kanganews.com nonbanks’ lending practices persist and could inhibit future
Chief executive
SAMANTHA SWISS funding growth.
sswiss@kanganews.com
16
Design consultants
HOBRA (www.hobradesign.com)
11
FEATU RE
Photography
DAVID SMYTH PHOTOGRAPHY, JULIAN
NZ securitisation
COPU B LI S HE D ROU N DTA B L E
WATT PHOTOGRAPHY, BEDFORD
PHOTOGRAPHY (SYDNEY), TIM
waking up
New Zealand’s securitisation market
TURNER (MELBOURNE), THE PHOTO
(WELLINGTON), ADEPT STUDIOS (MIAMI), has traditionally been underdeveloped,
AUSTRALIAN
GEORGE ARCHER (LONDON), TIGER TIGER with limited issuance giving little NONBANK
(AUCKLAND), STIRLING ELMENDORF
PHOTOGRAPHY, SEAN BRECHT incentive for institutional investors TRAJECTORY STILL
PHOTOGRAPHY (TOKYO) to devote analyst resources to the POINTING UP
asset class. Nonbanks are benefiting
from market growth, however – In September 2019, KangaNews
KangaNews, ISSN 1751-5548 (PRINT);
ISSN 2207-9165 (ONLINE), IS PUBLISHED and regulatory change could be the convened its annual roundtable
SIX TIMES A YEAR BY BONDNEWS LIMITED
catalyst for a further leap forward. discussion between the heads
AND DISTRIBUTED FROM SYDNEY,
AUSTRALIA. PRINTED IN AUSTRALIA BY
of funding at Australia’s most
prominent nonbank lenders –
14
SPOTPRESS, FOR, AND PUBLISHED BY,
BONDNEWS LIMITED, LYNTON HOUSE, 7-12 cohosted, for the first time, by
TAVISTOCK SQUARE, LONDON WC1H 9LT,
UNITED KINGDOM
Natixis. The fundamental story
© BONDNEWS LIMITED 2019. FEATU R E continues to be one of asset growth
and therefore of a need to keep
REPRODUCTION OF THE CONTENTS
OF THIS MAGAZINE IN ANY FORM IS Australian market building funding access.
PROHIBITED WITHOUT THE PRIOR
CONSENT OF THE PUBLISHER.
hopeful on broader
collateral
Issuance in the Australian
securitisation market has historically
been dominated by residential
mortgage-backed securities – a trend
which shows little sign of changing.
CAB average net
distribution 3,196 for
At the same time, though, there
six-month period ending appears to be growing supply of,
31 March 2019. and demand for, a wider range of
securitisation collateral.
Contents
SUBSCRIBE
TODAY
27
30
NONBA NK FO C U S
NEW LE N DE R FOC U S
ATHENA ENTERS
THE PANTHEON
Where many new lenders are seeking
Key information on Australia and
New Zealand’s leading nonbanks. growth in areas they believe are
under-served by the banks, Athena is
30 AVANTI FINANCE going head to head with established
players in the prime mortgage
33 BLUESTONE space. The company’s Sydney-based
MORTGAGES cofounder and chief operating officer,
Michael Starkey, tells KangaNews how
34 FLEXIGROUP it is winning business through a true
fintech offering – and how it will fund
36 LA TROBE its book.
FINANCIAL
38 LATITUDE 54 KangaNews is a one-stop
information source on
FINANCIAL SERVICES MARK E T DATA
anything relevant to
Exclusive information from the Australian and New
40 LIBERTY KangaNews deal database covering Zealand debt markets
FINANCIAL capital-markets transactions issued – including in- and
by nonbank lenders featured in this outbound issuance.
42 PEPPER GROUP yearbook.
Each issue provides all
the information market
45 REDZED LENDING participants need to
SOLUTIONS keep up to date with the
deals and trends making
46 RESIMAC headlines in the markets,
as well as in-depth issuer
49 STARGATE and investor insights, and
FLEXSTAR GROUP deal and league tables.
KangaNews is published
50 THINKTANK six times a year, with
GROUP regular reports and
yearbooks adding to
52 TOYOTA FINANCE the suite of printed
AUSTRALIA offerings. Subscribers
also have access to email
updates on breaking
This supplement is sponsored by: deals and news from the
KangaNewsAlert service,
PREMIUM PARTNERS: as well as priority
invitations to KangaNews
events and full access to
the www.kanganews.com
SUPPORTING PARTNERS: website.
To subscribe or request
a free trial please contact
Jeremy Masters
jmasters@kanganews.com
+61 2 8256 5577
ASSOCIATE PARTNERS:
Here for the
long-run
Resimac is one of Australia’s most prominent non-banks, with 34
years originating, servicing and securitising mortgage collateral.
Responsive to investor needs, with a stringent risk management
culture and a transparent enterprise approach.
Proven track record as a consistent global RMBS issuer throughout
various credit and spread cycles.
One of Australia’s few listed non-banks (ASX: RMC), Resimac’s
shareholders and Board share a long-term view to sustainable
growth and return opportunities in the Australian and New
Zealand markets.
Andrew Marsden Debbie Long
+612 9248 6507 +612 9248 0383
andrew.marsden@resimac.com.au debbie.long@resimac.com.au
resimac.com.au
Resimac Limited ACN 002 997 935. Australian Credit Licence 247283. Bloomberg: ‘RESI’ .
FEATURE
Nonbank mythbusting
The nonbank lending sector represents a significant portion of the Australian
securitisation market. While the volume and frequency of deals indicates
an increasing level of investor comfort with the sector, myths pertaining to
nonbanks’ lending practices persist and could inhibit future funding growth.
N
B Y M A T T Z A U N M A Y R
onbanks have come to be an integral part of Reserve Bank of Australia – is still low, its ambitions are greater.
the overall Australian securitisation market. The To achieve these, nonbanks will need a supportive funding market
sector printed record volume in 2017 with more that is comfortable with their business models.
than A$21 billion (US$14.1 billion) of deals Misconceptions and myths regarding the nonbank
priced. While volume in 2018 was slightly down, sector persist, though. The financial crisis cast a shadow over
the year represented the nonbanks’ greatest-ever proportion of securitisation and, in particular, securities backed by nonprime
market share at around 60 per cent of total public Australian loans – in other words, the stock in trade of many nonbanks –
dollar securitisation volume. even when such reputational damage was not warranted.
According to KangaNews data, by the beginning of Terms like “shadow bank” and “subprime” have been
September 2019 nonbanks had priced more than A$12 billion of remarkably sticky in spite of the sector’s best efforts to distance
securitisation deals in 2019, roughly half the market’s total volume itself from the practices which led to the financial crisis in the
(see chart 1). US – and the resilience of Australian nonbank securitisation
Many nonbanks have limited funding options outside of product before, during and after the crisis. Market participants
securitisation so their growth potential is inherently tied to that are engaged with nonbank issuers tend to be comfortable
their ability to raise volume from public securitisation markets. that Australian nonbank lending is not comparable with pre-crisis
Institutional-investor acceptance of nonbank lending, verification subprime.
and risk-management practices is therefore critical.
Nonbank securitisation volume corresponds with a significant D E F I N I N G N ON BA N K L E N D I N G
P
increase in lending origination in the nonbank sector. This has art of the problem appears to be a lingering negative
been driven primarily by regulatory and other pressures reducing perception of so-called shadow banks. The term itself
the scope of the borrower market banks are pursuing and thus suggests that an organisation is undertaking the operations
opening market share to nonbanks. of an authorised deposit-taking institution (ADI) beyond the
An Australian nonbank sector that was on the canvas after the purview of regulatory scrutiny.
financial crisis has rebounded. While its mortgage-market share By definition, a nonbank is not an authorised deposit-taking
– at around 5 per cent of total housing credit according to the institution (ADI). While some, such as La Trobe Financial, take
retail investment through a funds-management arm, they do not
take retail deposits in the way a bank does. This is an important
CHART 1. AUSTRALIAN SECURITISATION MARKET TOTAL ISSUANCE
distinction as it means there are no depositors whose savings
Bank Nonbank could be collateral damage in the event of a nonbank institution
50 running into trouble.
V O LUME (A$B N O R E QUIV ALE NT )
45
Like ADIs, nonbanks are credit providers but they
40
21.1
vehemently reject the idea that they operate in the shadows.
35 9
30
Peter Riedel, Melbourne-based chief financial officer at Liberty
25 4.6
7.5 7 Financial, points out that all lenders in Australia must obtain an
20 10.2
19.2
Australian Credit License (ACL) from the Australian Securities
12.1
15
3.7
30 and Investments Commission (ASIC).
24.9 24.6 25.5
10 22.9
“Irrespective of the way in which a lender is funded, their
15 15.3 12.6
5 13
capital strength or their formation, they need this license. It is
0
2011 2012 2013 2014 2015 2016 2017 2018 2019
indistinguishable between banks and nonbanks,” Riedel adds.
YTD ASIC’s responsible-lending laws apply uniformly to any
SOURCE: KANGANEWS 6 SEPTEMBER 2019
institution with an ACL. These laws require lenders not to
4 | K A N G A N E W S N O N B A N K Y E A R B O O K O C T / N O V 2 0 1 9
In today's economic climate, it is important
to know that your money is in good hands
with an experienced team that has a solid
track record of performance.
Over 65 years' experience of
Looking out for you®
Since 1952, La Trobe Financial has been meeting the needs of borrowers and
investors alike with specialist credit products.
Our experience, platforms and people make investing in residential and
commercial mortgages readily accessible to investors, creating consistent, risk
adjusted returns.
To learn more visit www.latrobefinancial.com
or call our treasury team
Martin Barry David Bleakley Richard Parry
Chief Treasurer & Strategy Officer Chief Settlements Officer Head of Group Portfolio Mng
+61 2 8046 1502 +61 3 8610 2831 +61 3 8610 2847
mbarry@latrobefinancial.com.au dbleakley@latrobefinancial.com.au rparry@latrobefinancial.com.au
La Trobe Financial Services Pty Limited ACN 006 479 527 Australian Credit Licence 392385
La Trobe Financial Asset Management Limited ACN 007 332 363
Australian Financial Services Licence 222213 Australian Credit Licence 222213
FEATURE
“Our nonconforming loss tracker is currently at around 4 basis
points on average. The worst time for losses in the nonbank
space was in the financial crisis, when they went to 60-70 basis
points. But every vintage since then has been well below 10
basis points.”
ILYA SEROV MOODY’S INVESTORS SERVICE
provide “unsuitable” credit to consumers via obligations previously would have qualified for a bank loan are now being
to make reasonable enquiries about the borrower, to assess serviced by the nonbank sector.
whether proposed lending is unsuitable and to provide a written This is particularly the case for investor loans. The Australian
assessment of this suitability. Prudential Regulation Authority only recently lifted lending
Martin Barry, chief treasurer and strategy officer at La Trobe restrictions on this segment for ADIs and it has become a
Financial in Sydney, explains that the enquiry and verification major growth sector for the nonbanks (see box on p8). Dylan
standards employed by his company meet these standards and Bourke, portfolio manager at Kapstream Capital in Sydney, says
then some. “We assess a borrower’s capacity to repay a loan using the migration of these borrowers has been credit positive for
a disciplined and thorough process. Often this involves lengthy nonbank lenders, though.
telephone interviews with the applicant and the applicant’s “Many investor borrowers previously would have been bank
employer, plus receiving physical evidence such as a declaration customers, they are low risk for nonbanks and have contributed
from their accountant if they are self-employed, and detailed to an overall improvement in the quality of most nonbank
asset-and-liability statements so we can properly verify income loan pools. This is particularly true of nonconforming pools,
and expenses.” as nonbank lenders focus more on investor loans and reduce
Indeed, the fact that nonbanks can and do undertake exposure to borrowers with adverse credit histories,” Bourke says.
specialist assessments on nonstandard – literally nonconforming Nonconforming lending, broadly defined, is any lending that
– borrowers is both what provides their opportunity to capture falls outside of bank prime criteria. It is likely where confusion
market share and, the lenders say, the foundation of their asset around subprime lending comes into play. As Barry explains,
quality. far from the severely credit-impaired subprime customer of the
By the necessary adherence to responsible-lending laws, true pre-crisis US market, it does not take much for a customer to fall
“subprime” loans – that is, “NINJA” loans to customers with no into the nonconforming category as defined in Australia. Being
income, no job and no assets – are not a feature of Australian self-employed or having missed a payment on a phone bill are
nonbank lending. Lending to highly credit-impaired borrowers is often enough cause to be turned away from traditional major
an infinitesimally small part of the market, Barry adds. lenders, he says.
He explains that La Trobe Financial, like its nonbank “At La Trobe Financial we work with the borrower to find
peers, closely monitors the changing regulatory and consumer solutions. If there is a minor credit blemish, we can work out
environment to ensure its approach continues to meet or exceed exactly what happened and, if we are comfortable it was a one-
industry best practice in relation to the protection of consumers off or the borrower’s circumstances have changed, we are usually
and meeting community expectations. happy to lend – subject to certain conditions,” Barry says.
With a changing financial-services regulatory and competitive Nonconforming is not the same as subprime or poor quality,
environment, Barry says nonbanks such as La Trobe Financial in other words. Barry gives the example of borrowers who wish
are becoming increasingly relevant. “We are very clear about the to invest in property through a self-managed superannuation fund
niche markets we serve, bringing choice and competition to those (SMSF), who have super-prime characteristics but are often not
identified markets in a responsible and sustainable way.” accommodated by major banks.
“Currently banks will not lend to an SMSF borrower because
EVO LVING LANDSCA PE it is a more complex lending arrangement via a trust which
I
t is not even accurate to assume that nonbank equals nonprime requires significant additional investment in credit-underwriting
lending. Nonbanks have come to occupy almost all parts of resources,” Barry comments. “But it is a perfectly legitimate
the lending market. Several maintain prime-lending operations practice to manage retirement savings. There is currently only a
which require multiple benchmark securitisation transactions per handful of nonbank lenders servicing such SMSF loans for what
year. In many cases prime and near-prime loans comprise the is an approximately A$800 billion industry.”
majority of nonbank books. Servicing borrowers that fall outside increasingly narrow,
It is true that banks are more restrictive than they once cookie-cutter bank credit criteria is the crux of the nonbanks’
were on who qualifies as a prime customer, and that many who value proposition. These borrowers are not poor-quality credit
6 | K A N G A N E W S N O N B A N K Y E A R B O O K O C T / N O V 2 0 1 9
PEACE OF MIND
Toyota Financial Services
We know the feeling. It’s the feeling of investing smart. It’s the feeling of confidence.
Confidence in a company that has been here since 1982 with billions in assets.
Toyota Financial Services and you, a loyal partnership for today and the road ahead.
Contact
x
Email: Investorrelations@toyota.com.au
Website: www.toyota.com.au/finance
Toyota Finance Australia Limited ABN 48 002 435 181
FEATURE
NONBANK POOL Service, says the proportion
of investor and interest-only
Coneybeare says while some
regional banks have a high
CHARACTERISTICS loans in nonbank pools has
stabilised in 2019 and even
reversed in some cases. He
geographic concentration,
nonbank pools tend to be well
diversified and concentration
While the pools of loans represented in
adds that even though overall issues are not evident.
nonbank securitisation are highly varied on nonbank exposure to these Furthermore, she adds that
account of the broad suite of institutions and loans remains elevated, it inner-city apartments have
products engaged in the sector, some key tends to be prime business. only ever made up around
1 per cent of the aggregate
similarities come through. “The important question to prime book in Australia.
Limiting loan-to-value 30 per cent of all Australian ask is around risk layering. If a
ratio (LVR) is a typical risk prime home lending. The loan has high LVR and is also Martin Barry, chief treasurer
mitigant employed by lenders nonbank prime book in nonconforming or alternative and strategy officer at La Trobe
in securitisation pools. 2018 contained around 35 documentation this may be of Financial, says his company
Nonbanks will typically have per cent interest-only loans greater concern. But in most will consider lending against
a slightly higher LVR in their against around 20 per cent circumstances this is not the apartments but all loans are
prime product than banks. for the entire prime book. case. Most of these loans are priced appropriately for risk.
in the nonbank prime space.
Narelle Coneybeare, senior She adds, though, that S&P So far, it has not translated “If it is a high-rise apartment
director, structured finance does not see these numbers into any uptick in arrears in the inner city the LVR will
at S&P Global Ratings as a cause for concern. Rather, rates or losses,” says Serov. be adjusted lower given the
(S&P), says this has been they are a result of the ongoing security compared with a block
exacerbated in the 2018 pool shift of these borrowers from Housing-market of 10 apartments in a suburb
vintage by nonbanks’ typically the bank to the nonbank sector. exposure surrounding the CBD, for
higher exposure to investor Coneybeare says: “Our view With the price correction in the example. There are localised
and interest-only loans. is that any incremental risk is Australian housing market over problems with apartments
accounted for in the structural the last two years being largely but as a speciality lender
According to Coneybeare, features of nonbank residential concentrated by geography we can navigate these by
investor loans in 2018 mortgage-backed securities.” and dwelling type, the limiting exposure to particular
were around 40 per cent exposure of lending institutions buildings and areas.”
of nonbanks’ prime books, Ilya Serov, associate managing to certain areas has come
whereas they were around director at Moody’s Investors under the microscope. While there has been a
managed retracement of
overall house pricing in
Australia, Barry says the
“Our view is that any incremental majority of price movement
has been in the higher-end
risk is accounted for in the structural property market. The bulk
features of nonbank residential of nonbank exposure is in
the median, where price
mortgage-backed securities.” volatility has been limited
NARELLE CONEYBEARE S&P GLOBAL RATINGS and in some instances
prices have increased.
and in most cases are far from the colloquial understanding of a On the day prior, Bank of Queensland (BOQ) printed the
subprime borrower. Class A notes of its Series 2019-1 REDS Trust at 98 basis points
over three-month bank bills. Both note classes had 2.9 years
REFLECTING RISK weighted-average life, and were rated triple-A and backed by
W
hile the portfolio-risk profile of many nonbanks prime collateral.
has likely become safer in recent years as they The spread differential between bank and nonbank prime
accommodate more near-prime and prime borrowers, RMBS transactions is relatively consistent. Ilya Serov, associate
the nonbank sector generally still pays a spread premium above managing director at Moody’s Investors Service in Sydney, says
ADIs for its securitisation transactions (see chart 2). the higher mortgage interest rates these spreads correspond to
According to KangaNews data, nonbank triple-A prime is the first line of defence against risk for investors in nonbank
senior securities typically price around 20 basis points wide of RMBS.
ADI prime transactions. This is most recently exemplified by Bourke confirms that the spread differential between
Resimac’s Premier Series 2019-2 transaction, which closed on 23 bank and nonbank securitisation transactions does not reflect
August, for which the class A2 notes priced at 115 basis points a perception of greater default risk, nor does it relate to the
over three-month bank bills. nonbanks’ origination and verification practices.
8 | K A N G A N E W S N O N B A N K Y E A R B O O K O C T / N O V 2 0 1 9FEATURE
enhancement provides a significant buffer for investors in
CHART 2. AUSTRALIAN RMBS TRIPLE-A RATED SENIOR
SPREADS (2-3.5 YEAR WAL) nonbank RMBS. “Around 45 per cent of our nonbank ratings
have more than twice the necessary credit enhancement, with the
Bank Nonbank benchmark for nonbank prime deals being 12-15 per cent in the
180 senior notes,” she says.
M ARG I N (BP /1 M BBS W )
160 An S&P report published on 30 July 2019 shows that the
level of credit support coverage across nonconforming RMBS
140
transactions is also typically much higher than the rating agency’s
120 minimum requirement. More than half of triple-A rated
100 nonconforming securities have at least three times the minimum
(see chart 3).
80
60
P ROOF OF T H E P UD D I N G
T
1 Feb 12 May 20 Aug 28 Nov 8 Mar 16 Jun 24 Sep 2 Jan 12 Apr 21 Jul
2016 2017 2017 2017 2018 2018 2018 2019 2019 2019 he higher margins and credit enhancement of nonbank
SOURCE: KANGANEWS 2 SEPTEMBER 2019 securitisation transaction structures may be more to do
with compensating investors for perceived liquidity and
funding considerations than the quality of underlying assets. In
CHART 3. CREDIT SUPPORT COVERAGE ACROSS
NONCONFORMING RMBS RATINGS
fact, the lending practises of nonbanks tend to be vindicated
further by the performance of their collateral.
Meets minimum requirements 1-2x 2-3x >3x Indicators such as arrears and losses historically favoured
100
10 14
bank securitisation. However, Coneybeare says a key trend that
20 22
has developed in recent years is a lower level of nonbank arrears
P R O P O R TI O N O F R A TI N GS
25
GR O U P (P E R E C E N T)
80 20
51 10 in securitisation pools compared with banks.
Serov says the co-mingling of prime and nonconforming
60
71
mortgages in nonbank securitisation pools is reflected in the
40 60 60
63 67 overall arrears performance, which has remained broadly stable.
35 The move to more prime lending from most nonbank originators
20
has led to an improvement in the average quality of nonbank
12
portfolios.
10 10 13 11 14
0 2 Furthermore, Serov tells KangaNews that a responsible
AAA AA A BBB BB B approach to loan-to-value ratio (LVR) is a further mitigant of
SOURCE: S&P GLOBAL RATINGS 30 JULY 2019 nonbank losses. He says there is a higher proportion of high-
LVR loans in some nonbanks books but the averages are less of a
“The spread differential reflects the fact that nonbanks are concern and there have not been many defaults.
typically smaller, unrated entities. This means more price volatility “Our nonconforming loss tracker is currently at around
due to limited funding options during risk-off periods and less 4 basis points on average, which reflects the LVR nonbanks
secondary liquidity.” originate in their businesses,” Serov comments. “The worst time
He also acknowledges, however, that nonbank liquidity for losses in the nonbank space was during the financial crisis,
has improved in recent years as the issuers gain greater brand when they went to 60-70 basis points. But every vintage since
recognition. then has been well below 10 basis points.”
There are ways other than spread in which nonbanks seek Natasha Vojvodic, senior director and head of Australian and
to assuage any investor concerns over liquidity and volatility New Zealand structured finance at Fitch Ratings in Sydney, says
risk. Riedel says the credit enhancement offered in nonbank the “cure rate” between the 1-29 day and the 30-60 day arrears
securitisation structures more than makes up for any perceived buckets tends to be higher for nonbanks than ADI lenders. She
incremental risk relative to ADI issuance. points out that this could reflect a more proactive approach to
“In aggregate, the losses from nonbank securitisation are managing customer arrears or a function of nonbanks tending to
slightly higher but the credit enhancement provided in nonbank have less volume of borrowers to manage.
securitisation is more than sufficient to eliminate arguably all of According to the Fitch Ratings Dinkum Index, bank and
the credit risk. Liberty’s annualised losses typically range between nonbank prime RMBS prepayment rates have historically tracked
0.5 and 1.5 basis points pre-LMI [lender’s mortgage insurance] a similar path, particularly in the years following the financial crisis.
recovery. But there is usually 3,000 basis points of credit Vojvodic says prepayment rates of bank and nonbank prime
enhancement provided to the triple-A investor,” Riedel reveals. mortgages track closely due to the similarity of products on offer.
Narelle Coneybeare, senior director, structured finance This homogeneity is thanks to the competitive environment in
at S&P Global Ratings in Sydney, tells KangaNews that credit Australian lending. •
1 0 | K A N G A N E W S N O N B A N K Y E A R B O O K O C T / N O V 2 0 1 9FEATURE
New Zealand
securitisation waking up
New Zealand’s securitisation market has traditionally been underdeveloped, with
limited issuance giving little incentive for institutional investors to devote analyst
resources to the asset class. Nonbanks are benefiting from market growth,
however – and regulatory change could be the catalyst for a further leap forward.
O
B Y L A U R E N C E D A V I S O N A N D C H R I S R I C H
ther than scale, arguably the biggest difference Andrew Marsden, Sydney-based general manager, treasury and
between the New Zealand securitisation market securitisation at Resimac, told KangaNews after the issuer’s latest
and its Australian equivalent is the source of residential mortgage-backed securities (RMBS) issuance in New
issuance. Nonbanks regularly provide around half Zealand in March 2019.
of all Australian issuance – a figure which looks The story is the same for nonmortgage assets. Eva Zileli,
impressive given these issuers’ small, albeit growing, share of the Melbourne-based treasurer at Latitude Financial Services –
mortgage market. New Zealand securitisation, however, has been which debuted in the New Zealand securitisation market with
a pure nonbank market for several years (see chart 1). a credit-card-backed transaction in December 2018 – suggests
The uptick in nonbank securitisation issuance in 2019 should that the nonbank opportunity set is also growing fast outside the
come as no surprise, as the New Zealand market is providing mortgage space.
a similar opportunity set to nonbank lenders as has emerged in
Australia. In short, a decade of increasingly onerous regulation – I N V E STOR E N GAG E M E N T
A
especially when it comes to capital – is making various types of key consideration for nonbanks active in New Zealand
noncore lending less appealing to local banks. will be access to a funding market of sufficient scale
New Zealand nonbanks have securitised mortgage, auto-loan to support business growth. Issuers say they are
and credit-card assets in roughly equal proportions since 2017 (see adequately supported by local warehouse provision. They are
chart 2). The banking sector’s prudential regulator, the Reserve also seeing signs of increasing investor engagement in the public
Bank of New Zealand (RBNZ), has helped open the door to securitisation market.
market growth for nonbank mortgage lenders. New Zealand’s most active securitiser is flexigroup, which
“The RBNZ’s macroprudential rules regarding investment has issued NZ$812 million (US$512 million) in aggregate across
and loan-to-value-ratio restrictions were relaxed in 2018. five transactions since the start of 2017. The firm’s Sydney-based
Previously these bifurcated the market, with bank prime group treasurer, Michael Malone, reveals that its most recent
mortgages being separate to everything else. But now, in theory, asset-backed securities (ABS) issue saw first-time participation
more opportunities should be open to the nonbank sector,” from some New Zealand-based institutional investors. flexigroup
met 15 investors on the roadshow preceding the NZ$300
CHART 1. NEW ZEALAND SECURITISATION ISSUANCE VOLUME million pricing of the Q Card Trust deal in August, of which 13
participated in the transaction.
Eclipx flexigroup MTF Resimac Avanti Latitude
“There is growing evidence of asset managers in New
1,600
Zealand further understanding securitisation structures, and doing
1,400
200 the due diligence and credit work necessary to enable them to
1,200 become securitisation investors,” Malone tells KangaNews. “We are
V O LUME ( NZ $M)
250
1,000 optimistic that we will see even more investors next time we bring
800 250
280
the Q Card programme to market.”
600
220
There is also a ready-made audience for New Zealand
453
400
200 securitisation in the form of the specialist institutional investor
209
200
200 base in Australia. Many of the names issuing securitisation in
224 250
0
150 New Zealand – including Avanti Finance (Avanti), Eclipx Group,
2017 2018 2019 YTD
flexigroup and Resimac – are active in Australia and are therefore
SOURCE: KANGANEWS 18 SEPTEMBER 2019
familiar to the buy side in that jurisdiction. The Australian real-
1 1FEATURE
money buyer base for nonbank securitisation is itself relatively
CHART 2. NEW ZEALAND SECURITISATION BY COLLATERAL TYPE,
small but it is sufficient to provide a significant demand boost to 2017-2019 YTD
New Zealand deals.
Avanti has printed New Zealand RMBS deals in 2018 and
2019 with demand from Australia and New Zealand. Paul
Jamieson, Avanti’s Auckland-based group treasurer, says: “We Credit-card ABS 35%
have seen over the years that a number of investors in these Auto ABS 34%
structures are in Australia – and this is not just the case for RMBS 31%
Avanti but for other issuers too. The interest in New Zealand
securitisation is almost as great for Australian investors as it is in
New Zealand.”
Even so, New Zealand nonbank securitisation has been more
a case of incremental evolution than a quantum leap forward. SOURCE: KANGANEWS 18 SEPTEMBER 2019
Deal size has grown somewhat but transactions are still typically
in the NZ$200-300 million range. Issuance margins have not The RBNZ has been working for some time on its residential
tightened appreciably, reliably coming in at 110-130 basis points mortgage obligation (RMO) proposal. With no established
over bank bills for the past two-and-a-half years. market for bank RMBS in New Zealand, the reserve bank has
focused on the volume of internal RMBS the major banks in
RM O IM PACT particular hold as liquid assets. It is concerned about the scale
T
o some extent this reflects the growth opportunity for of its obligation to accept these securities for repo and wants to
nonbank lending, which is itself a gradual process. Banks’ catalyse a public market for mortgage-backed paper to assist with
willingness to lend has been sticky in various sectors in price discovery and liquidity.
New Zealand. For instance, corporate borrowers report loan Developing the RMO is a work in progress and opinions
pricing remaining competitive long after many expected capital are divided on how successful it will be as a tool for persuading
rules to reduce banks’ price competitiveness. In the same way, banks to issue RMBS. There is some expectation, however, that
while the opportunity for mortgage and consumer lending is local banks will in time become securitisation issuers for funding
definitely real for nonbanks it appears to be opening up gradually. purposes. Far from being unwanted competition for investor
The pace of growth could be set for a step change on dollars, New Zealand nonbanks broadly welcome the idea of a
the back of further tightening of New Zealand bank capital large source of new supply.
standards. The RBNZ proposed late in 2018 that capital Their hope is that a bank RMBS – or RMO – market
requirements on the local major banks be increased to 18 with regular supply of benchmark deals should induce local
per cent of risk-weighted assets, and that this capital come in institutional investors to devote analytical resources to the asset
common-equity tier-one format. This is a substantial increment class that perhaps cannot be justified by sporadic nonbank
on existing capital requirements and nonbanks believe it will issuance alone.
make noncore business less profitable, and thus less appealing, For instance, speaking at the KangaNews New Zealand
for the banks. Debt Capital Markets Summit in Auckland in August, Resimac’s
“There is a clear link between RBNZ capital requirements director, treasury and securitisation, Debbie Long, said: “We
and market opportunities,” Zileli explains. “The increasing capital have spoken to investors that believe [the RMO] could deepen
requirements for banks in New Zealand make certain businesses the market in New Zealand. Investor mandates could broaden,
more attractive than they would have been previously. In and this would allow them to grow their teams and boost the
particular, this means businesses that are not core for banks such securitisation market.”
as credit cards and personal lending.” Bianca Spata, head of group funding at flexigroup in
The same is true – perhaps even more so – in the mortgage Sydney, confirms that the RMO was a frequent talking point on
space. Jamieson tells KangaNews there is a clear comparison for the the issuer’s most recent roadshow in New Zealand. flexigroup
potential path of nonbank growth. “Nonbank lending is more also views the prospect of bank RMBS issuance as a positive
accepted in Australia than New Zealand and I think we are going development for the New Zealand securitisation market as a
to see the pattern replicate in New Zealand,” he tells KangaNews. whole.
“I think there is opportunity for the RBNZ capital changes and “The fact that we will have banks executing RMBS
other market dynamics to widen the nonbank space.” transactions will mean much higher volume of securitised paper
In this environment, a larger and more price-competitive in the New Zealand market. We have seen investors that perhaps
New Zealand dollar securitisation market could only be a boon didn’t have a Kiwi ABS mandate before showing an interest in the
for local nonbanks. Another regulatory development, this one still space,” Spata comments. “We see the RMO as an opportunity to
in the pipeline, could provide a boon for all issuers – even though build out securitisation – and our own transactions – in the New
it is designed specifically for the bank sector. Zealand market, as and when the banks start issuing RMBS.” •
1 2 | K A N G A N E W S N O N B A N K Y E A R B O O K O C T / N O V 2 0 1 9FEATURE
Australian market hopeful
on broader collateral
Issuance in the Australian securitisation market has historically been dominated
by residential mortgage-backed securities (RMBS) – a trend which shows little
sign of changing. At the same time, though, there appears to be growing supply
of, and demand for, a wider range of securitisation collateral.
R
B Y L A U R E N C E D A V I S O N
MBS typically accounts for at least 80 per cent receivables for total volume of A$500 million. The issuer was
of Australian dollar securitisation issuance (see only established in 2013 and did not have significant origination
chart 1). This is hardly surprising given the scale growth until 2017. So a significantly accelerated path to public
of the local mortgage market. Deloitte estimates market joins the novel collateral type as notable achievements of
mortgage lending in Australia had total volume the ABS deal.
of around A$1.7 trillion (US$1.1 trillion) in 2018; Australian Exactly a week later, Columbus Capital priced A$250 million
Bureau of Statistics data estimate aggregate debt on Australian in a new RMBS transaction based on nonresident loans. While this
credit cards to be around A$52 billion at the end of 2018. deal does not add to non-RMBS volume it does denote willingness
The nonmortgage asset-backed securities (ABS) market has of Australian dollar investors to engage with less typical forms of
a well established shape in Australia. A handful of banks come collateral, as it was also the first deal of its type globally.
to market periodically with ABS, typically with volumes between Going back to 2017, Latitude Finance Australia (Latitude)
A$500 million and A$2 billion. But volume also comes from introduced Australia’s first securitisation master trust and its first
regular supply of multiple collateral types by nonbank issuers. programme based on credit-card receivables. Latitude has issued
Nonbanks generally supply at least half of total ABS issuance A$3.5 billion of ABS since its debut. While it has always found
in Australian dollars in any given year (see chart 2). Assets investor engagement easier offshore – where buyers tend to be
securitised include autos, credit cards, commercial mortgages and more familiar with master trusts – its Melbourne-based treasurer,
other consumer loans (see chart 3). Eva Zileli, says there are signs that the Australian dollar market is
Issuance data do not immediately suggest the market is becoming more welcoming of securitisation issuance outside the
becoming more diverse by collateral type. But underlying the RMBS space.
headline numbers are signs that a wider range of transaction types “We are seeing innovation come through in transaction
can be completed in Australia. In 2019, for instance, the market types and a growing diversity of issuers,” Zileli told KangaNews
saw a brace of world-first transactions price within a week. following Latitude’s latest deal – a A$750 million transaction
On 23 August, Zipmoney debuted as a public issuer with priced in early September. “I think this is great and I hope to see
the first-ever securitisation of buy-now-pay-later (BNPL) more – it allows investors to do work on things like ABS collateral
and master trusts in the knowledge that there will be supply to
CHART 1. AUSTRALIAN DOLLAR SECURITISATION BY COLLATERAL TYPE support that work.”
RMBS Other ABS
The securitisation market is clearly becoming relevant to
50
a wider range of issuers, including names that have access to
45 alternative forms of funding. Toyota Finance Australia is a case
8.1
40 in point. It has used its double-A corporate rating to good effect,
35
issuing A$1.2 billion in the domestic unsecured bond market, and
VO L UME (A$B N)
30
25 4.6
€1.7 billion (US$1.9 billion) and £250 million (US$304.3 million)
20 3.6 offshore since the start of 2018.
4.4 37.8
15 Even so, the company’s Sydney-based treasurer, Carol
10 24.9
20.3 Lydford, says an Australian ABS debut is under consideration.
5 17.6
“We have been asked, on many occasions and by quite a few
0
of our investors, when we will launch a public securitisation
2016 2017 2018 2019 YTD
transaction. So we are well aware of the significant demand for
SOURCE: KANGANEWS 16 SEPTEMBER 2019
this source of financing in Australia and offshore,” she reveals.
1 4 | K A N G A N E W S N O N B A N K Y E A R B O O K O C T / N O V 2 0 1 9COMPETITIVE LAN DSCA PE recognise the need to have the best digital platforms to enable us
T
he consumer sector appears to be the most natural growth to offer the best customer experience we can. We will continue to
area for nonmortgage lending. Banks’ share of the credit- invest in simplifying and enhancing our technology as part of our
card market is on a long-term decline while emerging transformation,” Spata explains.
consumers are engaging with new types of lending including the Latitude sees BNPL as a customer-acquisition play. Zileli
burgeoning BNPL market. says the company’s new BNPL product is unlikely to make
Established lenders are taking note of changing customer an immediate impact on the overall asset book. But Latitude
behaviour and attempting to deliver products that are relevant wants to engage with customers at an early stage of financial
to millennial consumers. Bianca Spata, head of group funding independence.
at flexigroup in Sydney, says: “The BNPL sector is growing
exponentially year-on-year. While we have been in this space ECON OM I C H E A DW I N DS
A
for many years, we recognised the need to redefine our offering nother challenge for nonbanks in areas like auto and
and relevance to consumers and have seen great momentum consumer loans is the chillier economic environment of
following the launch of humm earlier this year.” 2019.
Spata says flexigroup also sees the latest extension of its Jamieson acknowledges: “Motor-vehicle sales growth is down
BNPL offering – bundll -– as a “game changer” that will provide in Australia and we expect it will be similar in New Zealand in
the company with an opportunity to cement itself as a market the next little while. Both countries have GDP growth coming
leader in the sector. off and confidence also declining a bit, while household debt is
On the other hand, the consumer-lending space is arguably at really high levels in both countries. I think we will see a slight
where established lenders face the greatest challenge from market slowing the auto space.”
entrants including fintechs. Millenial consumers tend to have less Overall, however, the downturn has been marginal so far.
established relationships with financiers and to desire the type of “Although card-receivables balances have been coming down
on-demand credit fintechs specialise in providing. the actual spend on credit cards has not reduced. People are still
Some established nonbanks differentiate their business spending but they are also paying off their credit cards on the due
models from those of emerging lenders. Paul Jamieson, group date,” Zileli reveals. “There hasn’t been a noticeable impact on our
treasurer at Avanti Finance (Avanti) in Auckland, explains: “We business despite the softness we are seeing in retail spending and
think we have a defendable niche and in fact we welcome the consumer sentiment – certainly not in arrears.”
widening of the market. We use technology to improve processes. Nonbanks aim to maximise the value of their offerings,
However, a human looks at every single application to make sure and thus their market share, even in tougher market conditions.
it is right for the customer and for Avanti. The traditional credit-card market may be shrinking overall, for
Jamieson says Avanti’s offering is between a traditional lender, instance. Zileli says increasing use of debit cards and BNPL –
which may take a week or two to turn an application round, and which does not show up in credit-card data – has likely cut into
a fintech player, which tends to be about instant application and volume. But this does not remove the nonbank opportunity.
approval or decline.” “Despite the reducing system level of credit-card
Spata explains that flexigroup has redefined its strategy over receivables, Latitude is still growing its market share,” Zileli
the past year. It is now focused on three core offerings – BNPL, reveals. “We are maintaining some momentum by constantly
credit cards and leasing – and is streamlining origination systems trying to improve our offering through digitisation, thereby
and processes to ensure scalability and facilitate growth. “We making life easier for borrowers.” •
CHART 2. AUSTRALIAN DOLLAR SECURITISATION ISSUANCE EX. RMBS CHART 3. AUSTRALIAN NONMORTGAGE ABS SUPPLY
BY COLLATERAL TYPE
Bank Nonbank
9,000 Auto ABS CMBS Consumer ABS Other nonmortgage ABS
100 350 450 450
8,000
PRO PO RT IO N O F MARKE T
260
7,000 80 800
680 3,007 1,550
V O LUME ( A$M)
6,000
(PER CE NT )
4,884 765
60
5,000
800
4,000 40
2,151 3,061
3,000 3,564
2,462 20 2,549 2,089
2,000 3,856
3,229
1,000 2,200 0
1,000 1,177
0
2016 2017 2018 2019 YTD
2016 2017 2018 2019 YTD Note: bar label figures are A$m.
SOURCE: KANGANEWS 16 SEPTEMBER 2019 SOURCE: S&P GLOBAL RATINGS 30 JULY 2019
1 5COPUBLISHED
ROUNDTABLE
AUSTRALIAN NONBANK
TRAJECTORY STILL
POINTING UP
n September 2019, KangaNews convened its annual roundtable
I discussion between the heads of funding at Australia’s most prominent
nonbank lenders – cohosted, for the first time, by Natixis. The
fundamental story continues to be one of asset growth and therefore a need to
keep building access to global funding options.
PARTICIPANTS
n Martin Barry Chief Treasurer and Strategy Officer LA TROBE FINANCIAL n Fabrice Guesde Head of Global Structured Credit Solutions, Asia Pacific NATIXIS
n Andrew Marsden General Manager, Treasury and Securitisation RESIMAC n Peter Riedel Chief Financial Officer LIBERTY FINANCIAL
n Andrew Twyford Treasurer PEPPER
MODERATORS
n Laurence Davison Head of Content and Editor KANGANEWS n Matt Zaunmayr Senior Staff Writer KANGANEWS
THE COMPETITIVE ENVIRONMENT n BARRY Over the last five years the Australian lending market
has seen three key inflection points. First, there was the 2014
Davison When we first hosted this discussion, Financial System Inquiry, with its insistence that banks be
in 2016, there was a sense of optimism regulated conservatively so as to be “unquestionably strong.”
among the major nonbanks about the Second, the regulators worked in unison to impose
opportunities for market-share growth. How macroprudential regulatory policies such as lending speed limits
do nonbanks view the past three years from to cool ostensibly overheated housing markets in Sydney and
a business sense: have lenders matched or Melbourne. The speed limits have been reversed out but credit
even exceeded their growth targets? standards remain at the higher water mark.
1 6 | K A N G A N E W S N O N B A N K Y E A R B O O K O C T / N O V 2 0 1 9More than
developing business,
together we build a
long-term partnership
to support your strategic
decisions
From origination to distribution,
Natixis builds on its international capabilities
to support your transactions along
the whole value chain
CREATIVE FINANCIAL SOLUTIONS
For more information, please contact:
Oscar Austin Milos Ilic-Miloradovic Fabrice Guesde
Global Markets, Australia GSCS, Australia Head of GSCS Asia Pacific
Tel : +61 2 8063 1711 Tel : +61 2 8063 1725 Tel : +852 3900 8451
oscar.austin@natixis.com milos.ilic-miloradovic@natixis.com fabrice.guesde@natixis.com
Natixis Australia Pty Ltd Natixis Australia Pty Ltd Natixis APAC Headquarters
Level 26, 8 Chifley Square Level 26, 8 Chifley Square Level 72 – ICC, 1 Austin Road
2000 Sydney NSW, Australia 2000 Sydney NSW, Australia Kowloon, Hong Kong
www.apac.cib.natixis.com/australiaCOPUBLISHED
ROUNDTABLE
Third, and most dramatically, was the Hayne royal n MARSDEN Growth in the nonbank sector will always be
commission, the recommendations of which are still being regulated by the combination of domestic and global residential
worked through. mortgage-backed securities (RMBS) markets, system credit
All of these have contributed to an aggregate market shock growth and any change in capital regimes for the banks and
of a degree not experienced for many years. There has been a their wholesale cost of funds.
clear retracement in overall credit formation as banks have been We have not really seen any material changes in the tiering
forced to tighten their lending standards. of wholesale funding cost for authorised deposit-taking
One consequence has been the creation of a funding gap institutions (ADIs) and nonbanks. Risk-capital weights have
of around A$75 billion (US$50.5 billion) per year for residential offered our sector some additional opportunities in the prime
lending and around A$41 billion for commercial lending – both space since 2015 but there are effective parameters that regulate
of which are more than 20 per cent of total annual market nonbank growth.
volume in these sectors. n TWYFORD Overall, we think the nonbank industry has been
This gap, or under-served market, has in part been forgone well positioned to take advantage of a number of different
entirely – reflected in lower credit-system-growth numbers. opportunities that the changing lending environment created in
But in part it has been picked up by the nonmajor banks, the past few years.
credit unions, foreign banks and nonbank lenders. All of these Things have become more competitive in the nonbank
segments have experienced growth rates in mortgage volumes space. But the fact remains that all issuers are different in the
above the lacklustre 2.9 per cent system growth rate for way they approach lending – which is good for investors.
FY2019. For instance, some have focused more on prime lending and
An important point for investors, however, is that this thus going head-to-head with the banks. Pepper has grown
market tilt away from the majors is simply a reversion back to the prime share of its book as the near-prime portion of the
the long-term average. Nonbank market share, for example, has industry grew.
traditionally – even as far back as the 1970s and 1980s – sat at We had a very strong year in originations in 2018. Whereas
around 20 per cent. It was as high as 30 per cent prior to the 2019 has been a year of consolidating this position, with the
financial crisis. Its current level, of less than 10 per cent, is well banks returning to the market. Overall, if we were to predict
below the natural level and we expect it to mean revert over the market three years ago we would have been hoping to drive
time, in a measured way. ahead with opportunities as and when they arose. I think it’s
At La Trobe Financial, we have not changed credit jaws and fair to say we have done this and more.
have barely changed our pricing. We are essentially delivering We have also worked hard to show our investor base that
the same product set – and this has been good for our our originations process remains robust despite the growth.
investors. We have adopted a disciplined investment approach Everything we originate must be something we can securitise.
to underlying assets rather than chasing growth for growth’s This transparency has been rewarded: our growth in 2018 was
sake. strongly supported by investors.
n GUESDE This is a global trend and in fact Australia is unusual n BARRY Nonetheless, we are still seeing the banks skew
in how small its nonbank market share is. Disintermediation towards the more vanilla, prime type of customer. Anything
has been a wave around the world which has led to at least 15- which requires additional credit work has fallen outside the
20 per cent market share for nonbanks. In the US it is probably remit of the banks. In our view, the natural market share for
60-65 per cent and in Europe it can be up to 35-40 per cent. this type of customer across the cycle remains in the 20-30 per
There is no fundamental reason why this trend should not cent range. This aligns with long-term nonbank market share
reach Australia. and is moderate-to-low in a global context.
After the financial crisis, the nonbanks’ market share n RIEDEL For Liberty Financial, achieving sustainable growth is
shrunk to a level which was not representative of what the highly correlated with differentiation. We seek to outcompete
players could offer. There was a normalisation stage and then a based on customer service. This is about delivering two things:
rebalancing between the banks and the nonbanks. providing a superior customer experience at application and
“We are essentially delivering the same product set – and
this has been good for our investors. We have adopted a
disciplined investment approach to underlying assets rather
than chasing growth for growth’s sake.”
MARTIN BARRY LA TROBE FINANCIAL
1 8 | K A N G A N E W S N O N B A N K Y E A R B O O K O C T / N O V 2 0 1 9through the life of a loan, and producing consistent lending
solutions that suit customer needs.
It is this focus on good customer outcomes that has
allowed us constantly to outgrow the system over the past three
years. We have always focused on service as a differentiator
and on continually innovating so we can deliver improved
outcomes year-on-year.
The opportunity for growth persists because we engage
customers with an effective service proposition that is superior
to the banks.
Davison So the nonbanks believe their market
share is still in a rebound phase?
n BARRY Absolutely. At current market share of 7-8 per cent
there is some room to grow before nonbanks get back to
historical levels.
n MARSDEN There is a chance to return to a long-run profile
in market share as banks are no longer originating certain
products in the mortgage space that they would have been
prior to the financial crisis. The nonbank sector is now almost
the exclusive provider of credit to some parts of the mortgage
market.
Davison We have detected a mood among
the major banks in the past few months
that the sector is ready to put the royal
commission, regulatory developments more
generally and macroprudential restrictions
behind it to some extent and therefore has
renewed appetite for providing credit. Do
nonbanks have a sense that there is no and will find it much harder to grow revenue. I expect banks
longer a ‘free kick’ when it comes to winning will increase their offering of fixed-rate loans to lock in NIM
market share from the big banks, and that the [net-interest margin]. However, this competition shouldn’t
competitive environment is getting harder? affect us materially as fixed-rate loans is a very small component
n RIEDEL Our continued growth has been supported by of our customer value proposition.
customers’ frustration with banks. Since the royal commission, n TWYFORD It is already very competitive out there. There are
consumers have found responsive service times and predictable some very low-margin products in the marketplace. Obviously,
answers harder to find. Banks continue to be internally focused, we need to make sure we are always competitive on price.
as they adapt to regulatory change and manage customer But at the end of the day we back ourselves on the standard
remediation. We remain confident of continuing to grow our of delivery we provide to our third-party intermediaries and,
market share. ultimately, to our customers.
However, we do expect price competition to emerge from At the same time, we have seen some other nonbanks
banks – particularly in fixed-rate loans. In a low interest-rate expand their own offerings. This has created some competition
environment, banks make less money from their deposit books in certain segments we are focused on. The way I see it, 2019
“Disintermediation has been a wave around the world which
has led to at least 15-20 per cent market share for nonbanks.
In the US it is probably 60-65 per cent and in Europe it can be
up to 35-40 per cent. There is no fundamental reason why this
trend should not reach Australia.”
FABRICE GUESDE NATIXIS
1 9You can also read
