Home Loans News: 22 Feb 2010
A RECOVERY in securitisation markets is gathering pace with an increasing number of banks and financiers managing to get away issues that are bolstering competition in the home loan sector...
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Several packages are under consideration that could see billions of dollars raised in the coming months from an area of finance that before the global financial crisis enabled smaller lenders to compete head-on with the big four banks.
However, the squeeze on funding has since seen the major banks grab more than 90 per cent of the new mortgage market.
Recent issues by the Bendigo and Adelaide Bank, the Bank of Queensland and AMP Bank, however, have encouraged confidence in the residential mortgage-backed securities (RMBS) market and seen increasing private investor demand as a consequence.
AMP Bank, which has 1 per cent of the home loans market, is actively looking to tap the RMBS sector on at least two more occasions this year after a successful issue of $1 billion securities last month.
Like many of its counterparts, the mortgage arm of AMP is dependent on a mix of funding to maintain its home loan book, which at the end of December stood at $9.8 billion.
AMP Bank, which has 100,000 mortgage customers, receives two-thirds of its funding from retail, superannuation and wholesale deposits, but needs to fill the remaining third from securitisations.
A shortfall in funding in the last calendar year caused by the financial crisis-fuelled malaise in securitisation markets led to the AMP Group making a $200 million short-term loan to the bank to maintain its mortgage offerings. That is due to be repaid later this year as the bank's financial position improves.
Craig Dunn, AMP's chief executive, told analysts at the company's full-year profit briefing last Thursday, that funding issues had constrained the group's capacity to expand the bank's home loan business.
''However, with securitisation markets looking like they're starting to open and looking more positive and well-supported by the government's [financing] program we'd be keen to grow the business [this year],'' he said.
AMP's latest funding move came after a successful and similarly sized RMBS issue by Bendigo Bank in December and a surprise $2 billion tapping of the same market by Westpac after an absence of more than 2½ years by a major bank.
Demand from investors was such that original amounts requested by lenders were increased significantly.
That sentiment was underlined by a follow-up issue of securities by the Bank of Queensland earlier this month, when it announced it was looking to raise $500 million but eventually harvested $850 million when its first target was oversubscribed.
One of the key factors helping investor confidence over the past 12 months has been the support of the federal government's Australian Office of Financial Management, which has pumped more than $8 billion into the market since September 2008.
It recently announced that it would this year purchase a further $3.4 billion of RMBS securities to cover issues by AMP Bank, Members Equity Bank and non-bank lenders, Resimac, Liberty Financial and FirstMac. It also acquired $250 million of the Bank of Queensland's latest funding notes.
The AOFM recently estimated that its backing and the support from private investors had financed mortgages taken out over more than 62,000 properties worth a total of $17 billion.
SOURCE: Danny John - Sydney Morning Herald
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