Fitch Affirms Four Torrens RMBS Classes; Upgrades One

(The following statement was released by the rating agency)SYDNEY, June 16 (Fitch) Fitch Ratings has affirmed four classes and upgraded one class of notes from two Torrens series. The transactions are securitisations of Australian conforming residential mortgages originated by Bendigo and Adelaide Bank Limited (A-/Stable/F2). A full list of rating actions follows at the end of this commentary.KEY RATING DRIVERSThe affirmations reflect Fitch's view that available credit enhancement supports the notes' current ratings, the agency's expectations of Australia's economic conditions and that the credit quality and performance of the loans in the collateral pools have remained within the agency's expectations. The upgrade of the class B notes of TORRENS Series 2014-2 Trust reflects the build-up of credit enhancement sufficient to achieve a higher rating.As per the APAC Residential Mortgage criteria, the default model was not run for the TORRENS Series 2014-1 Trust as a review of pre-determined performance triggers indicates that the transaction displays stable asset performance. The default model was run for the TORRENS Series 2014-2 Trust. At 30 April 2016, 30+ day arrears for TORRENS Series 2014-1 Trust and TORRENS Series 2014-2 Trust were 1.43% and 1.01%, respectively, compared with Fitch's 4Q15 Dinkum RMBS index of 0.95%. The underlying pools are 100% covered by lenders' mortgage insurance (LMI), provided by Genworth Financial (NYSE:GNW) Mortgage Insurance Pty Limited (Insurer Financial Strength Rating: A+/Stable) and QBE Lenders' Mortgage Insurance Limited (Insurer Financial Strength Rating: AA-/Stable). Losses have remained low since closing, with just one loss of AUD164,381 in TORRENS Series 2014-1 Trust. TORRENS Series 2014-2 Trust has not experienced any losses since closing. All losses to date were covered by LMI or excess spread.RATING SENSITIVITIES Sequential pay-down has resulted in an increase in credit enhancement levels for the senior notes of both the transactions, with the rated notes able to withstand multiples of the latest reported arrears. The ratings are not expected to be affected by modest changes in performance.For the TORRENS Series 2014-2 Trust, Fitch's 'AAAsf' breakeven default rate is 8.07%. The class A and AB notes can withstand an additional 46.5% and 7.1% in defaults at Fitch's 'AAAsf' loss severity. The class B and C notes can withstand an additional 4.8% and 5.6% in defaults at their respective loss severities.The ratings of both the transactions' class A notes are independent of downgrades to the LMI providers' ratings. The remaining notes of TORRENS Series 2014-2 Trust are LMI dependent and can withstand at least a two-notch downgrade of the rated LMI providers at the corresponding rating levels. DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating action.DATA ADEQUACY Fitch conducted a file review of 10 sample loan files focusing on the underwriting procedures conducted by Bendigo and Adelaide Bank Limited compared to its credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis.A comparison of the transaction's representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the reports and/or links given under Related Research below. The rating actions are as follows (Note balances as of 30 April 2016):TORRENS Series 2014-1 Trust:AUD234.3m Class A (ISIN AU0000TNHHB2) notes affirmed at 'AAAsf'; Outlook Stable.TORRENS Series 2014-2 Trust:AUD368.5m Class A (ISIN AU0000TOZHA4) notes affirmed at 'AAAsf'; Outlook Stable;AUD34.8m Class AB (ISIN AU3FN0026001) notes affirmed at 'AAAsf'; Outlook Stable;AUD8.4m Class B (ISIN AU3FN0026019) notes upgraded to 'AAsf' from 'AA-sf'; Outlook Stable; andAUD2.4m Class C (ISIN AU3FN0026027) notes affirmed at 'Asf'; Outlook Stable.Contacts: Lead Surveillance Analyst Hai Duong LeAssociate Director+61 2 8256 0358Fitch Australia Pty Ltd.Level 15, 77 King St, Sydney, NSW 2000 Committee Chairperson Natasha VojvodicSenior Director+61 2 8256 0350Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com.Additional information is available at www.fitchratings.com.Sources of Information:The source of information used to assess this rating was Bendigo and Adelaide Bank Limited. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.Applicable Criteria APAC Residential Mortgage Criteria (pub. 23 Jun 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867437Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744175Global Criteria for Lenders’ Mortgage Insurance in RMBS (pub. 23 Jun 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865195Global Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952Related Research Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions (Applicable to Transactions Rated from Sept.26, 2011 until June 15, 2015) https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863817TORRENS Series 2014-1 Trust https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738475TORRENS Series 2014-1 Trust - Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738616TORRENS Series 2014-2 Trust https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=836748TORRENS Series 2014-2 Trust - Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=836749Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=1006213Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1006213Endorsement Policy https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det ail=31ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.