Surging Issuance and Investor Confidence
Peter Riedel, Chief Financial Officer of Liberty, emphasized the market’s momentum, noting that asset-backed securitisations (ABS) have yet to reach their peak as a funding mechanism for non-bank lenders. Speaking on a panel about the market’s state in 2024, Riedel remarked, “All loans since the GFC have performed exceptionally well, and investors remain confident in the collateral supporting Australian securitisations.”
Riedel highlighted the significant increase in total securitisations this year, which reached $59 billion, up from $41 billion in 2023. He projected even greater growth in the coming years. “There’s no reason why Australian non-bank lenders couldn’t issue $100 billion in total annual ABS in the near future,” he asserted.
Australia’s Auto ABS Market Gains Ground
Stephen Mixter, Group Treasurer at Angle Auto Finance, reinforced the sector’s promising outlook, particularly for auto ABS. “The market issuance doubled over 2023 levels, making the Australian auto ABS market the third largest globally, behind the US and Germany,” Mixter shared.
His company’s success with two Panorama deals, raising over $2 billion and attracting 43 investors globally, underscores the sector’s international appeal. However, Mixter noted the need to further engage domestic investors, suggesting that adjustments to investment mandates could bolster local participation.
Mixter also highlighted the appeal of auto ABS for investors, citing quicker paydowns and reliable payment flows. “Nearly 50% of our book comprises novated leases, with payments directly deducted from payslips,” he explained.
ING’s Stellar Performance in 2024
Charlene Braytenbach, Manager of Debt and Capital Markets at ING Bank Australia, shared her institution’s recent achievements in securitisation. In May 2024, ING raised $1.25 billion through 3-year unsecured bonds and $1.5 billion through an IDOL RMBS deal. The bond issuance attracted over 100 potential investors and was oversubscribed to $3 billion, while the RMBS notes drew interest from 20 investors.
Braytenbach also highlighted ING’s strong arrears performance, which significantly outpaced industry averages. “Our 30-day arrears were 0.6%, and 90-day arrears were 0.3%, compared to the industry’s 1.0% and 0.6%,” she noted, further showcasing the resilience of ING’s loan portfolios.
Specialisation Driving Growth
During a buy-side panel discussion, Tim Stalker, Director of Credit Relative Value at Westpac Institutional Bank, echoed the enthusiasm for auto ABS, citing its shorter weighted average life and reduced prepayment risk. He also highlighted the benefits of specialist management of loan pools, referencing transactions like Allied Credit’s acquisition of Macquarie Bank’s auto dealer finance business and Angle Auto Finance’s acquisition of Westpac’s auto finance division in 2021.
“These developments ensure that auto ABS pools are managed by experts, which is a positive for investors,” Stalker stated.
A Bright Future Ahead
As the Australian securitisation sector continues to evolve, its strong fundamentals, rising investor demand, and innovative financing structures are setting the stage for sustained growth. With market leaders projecting further expansion, 2024 is shaping up to be another banner year for the industry.
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