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(The following statement was released by the rating agency)SYDNEY, July 06 (Fitch)
Fitch Ratings has affirmed four classes of notes from three Pinnacle series. The transactions are securitisations of Australian conforming residential mortgages originated by Police & Nurses Limited, trading as P&N Bank.
The rating actions are as follows:
Pinnacle Series Trust 2010-T1 (Pinnacle 2010):AUD41.7m Class A2 (ISIN AU3FN0012274) affirmed at 'AAAsf'; Outlook Stable
AUD5.5m Class AB (ISIN AU3FN0012282) affirmed at 'AAAsf'; Outlook Stable
Pinnacle Series Trust 2013-T1 (Pinnacle 2013):AUD92.9m Class A (ISIN AU3FN0020624) affirmed at 'AAAsf'; Outlook Stable
Pinnacle Series Trust 2014-SST (Pinnacle 2014):AUD489.5m Class A (ISIN AU3FN0022190) affirmed at 'AAAsf'; Outlook Stable
KEY RATING DRIVERS
The 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 remain within the agency's expectations. As per the APAC Residential Mortgage criteria, the default model was not run for Pinnacle 2013, as a review of pre-determined performance triggers indicates the transaction displays stable asset performance. The default model was run for the Pinnacle 2010 and Pinnacle 2014 transactions. The Pinnacle 2010, Pinnacle 2013 and Pinnacle 2014 transactions' 30+ day arrears were 1.60%, 1.29% and 0.84%, respectively, at 31 May 2016, compared with Fitch's 4Q15 Dinkum RMBS Index of 0.95%. The underlying pools are covered by lenders' mortgage insurance (LMI), provided by Genworth Financial (NYSE:GNW) Mortgage Insurance Pty Limited (Insurer Financial Strength: A+/Stable) and QBE Lenders' Mortgage Insurance Limited (Insurer Financial Strength: AA-/Stable).
The underlying pool for the Pinnacle 2010 and Pinnacle 2013 transactions have 100% LMI coverage, while the Pinnacle 2014 transaction has 25.5% coverage. Losses remain low since closing, with just one loss of AUD29,004 in Pinnacle 2010, which was fully covered by LMI. Pinnacle 2013 and Pinnacle 2014 transactions have not experienced any losses since closing.
All three pools are highly concentrated in Western Australia, with more than 90% of mortgages in the portfolio secured over properties in the state.The Pinnacle 2014 transaction has a 10-year revolving period, of which less than eight years remain. Fitch regards the long revolving period as acceptable, because the transaction has portfolio parameters, the portfolio stratifications have not changed significantly since initial issue and the portfolio is performing as expected.
RATING SENSITIVITIES
Sequential pay-down has increased credit enhancement for the senior notes of the Pinnacle 2010 and Pinnacle 2013 transactions, with the rated notes able to withstand multiples of the latest reported arrears. Fitch does not expect modest changes in performance to affect the ratings. The rated notes for all the transactions are independent of downgrades of the LMI providers' ratings.For Pinnacle 2010, Fitch's 'AAAsf' breakeven stressed default rate is 10.5%. The class A2 and AB notes can withstand an additional 78.3% and 25.3%, respectively, in defaults at Fitch's 'AAAsf' loss severity.
For Pinnacle 2014, Fitch's 'AAAsf' breakeven stressed default rate is 19.5%. The class A notes can withstand an additional 8.1% in defaults at Fitch's 'AAAsf' loss severity.
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 P&N Bank 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 affect 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 under Related Research below.Contacts: Lead Surveillance Analyst Hai Duong LeAssociate Director+61 2 8256 0358Fitch Australia Pty Ltd., Level 15, 77 King St, Sydney, NSW 2000Committee Chairperson
Natasha VojvodicSenior Director+61 2 8256 0350
Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com.Additional information is available at www.fitchratings.comSources of Information:The source used to assess these ratings is P&N Bank. 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 Lendersâ 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. 27 Jun 2016)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130Related Research Pinnacle Series Trust 2010-T1 https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=581565Pinnacle Series Trust 2013-T1 https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720916Pinnacle Series Trust 2013-T1 - Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720917Pinnacle Series Trust 2014-SST - Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736856Representations, 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=863817Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=1008472Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008472Endorsement 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.