(The following statement was released by the rating agency) Fitch Ratings-Sydney-October 25: Fitch Ratings has upgraded one and affirmed four classes of notes from ConQuest 2014-2 Trust. The transaction consists of notes backed by pools of first-ranking Australian residential full-documentation mortgage loans. All mortgages were originated by MyState Bank Limited and the notes were issued by Perpetual Trustee Company Limited in its capacity as trustee of ConQuest 2014-2 Trust. The upgrade is due to changes in some calculation conventions in the cashflow model in the APAC Residential Mortgage Rating Criteria dated 23 October 2018. The rating actions are as follows (as of August 2018 reporting): AUD95.6 million Class A1 (ISIN AU3FN0026076) notes affirmed at 'AAAsf'; Outlook Stable AUD6.9 million Class A2 (ISIN AU3FN0026084) notes affirmed at 'AAAsf'; Outlook Stable AUD6.4 million Class AB (ISIN AU3FN0026092) notes affirmed at 'AAAsf'; Outlook Stable AUD5.3 million Class B1 (ISIN AU3FN0026100) notes upgraded to 'AAAsf', from 'AAsf'; Outlook Stable AUD1.8 million Class B2 (ISIN AU3FN0026118) notes affirmed at 'BBB+sf'; Outlook Stable KEY RATING DRIVERS Operational Risk: MyState is an authorised deposit-taking institution. Fitch undertook an onsite operational review and found the operations of the originator and servicer were comparable with other conforming lenders. Asset Analysis: The 'AAAsf' weighted-average (WA) foreclosure frequency increased to 9.3%, from 9.1% at the last review, while the WA unindexed loan/value ratio (LVR) decreased to 58.1%, from 58.9%. The 'AAAsf' lenders' mortgage insurance (LMI) dependent WA recovery rate increased to 88.4%, from 88.0%, driven by the decrease in the WA indexed scheduled LVR to 55.8%, from 58.4%. As at end-August 2018, 30+ and 90+ day arrears were both 1.05%, inclusive of hardship loans, higher than Fitch's 2Q18 Dinkum RMBS Index 30+ and 90+ day arrears of 1.09% and 0.55%, respectively. However, the bond factor was a low 39% and arrears as a balance has been stable over the previous year. Hardship loans are classified as three months in arrears under Fitch's methodology. There have been no losses.
Liability Analysis: The class A1, A2, AB, B1 and B2 notes benefit from credit enhancement of 18.5%, 12.6%, 7.1%, 2.6% and 1.1%, respectively. Structural features include a liquidity facility sized at 0.75% of the aggregate note balance, with a facility floor of AUD225,000. The class A1, A2, AB and B1 notes can withstand all relevant Fitch 'AAAsf' stresses applied in our cash-flow analysis. The class B2 notes can withstand all Fitch's 'BBB+sf' stresses. Macroeconomic Factors: Fitch expects stable mortgage performance, supported by sustained economic expansion in Australia. The economic outlook is driven by stable forecast GDP growth of 2.8% and one 25bp cash rate increase in 2019. The pool has a 36.1% concentration in Queensland and 29.7% in Tasmania. The macroeconomic outlook for both states is stable. RATING SENSITIVITIES Fitch does not expect the ratings to be affected by any foreseeable change in performance. The prospect of downgrade is remote, given the level of subordination to all rated notes, pool performance and adequate excess spread. The rating on the class A1 and A2 notes are LMI-independent and therefore unaffected by downgrades in the LMI providers' ratings. The remaining rated notes are LMI-dependent and therefore sensitive to downgrades of the LMI providers' ratings. The class AB notes can withstand a two notch downgrade and the class B1 and B2 notes can withstand no downgrades. Fitch conducted sensitivity analysis by stressing the transaction's base-case assumptions. The results of rating-sensitivity testing, using the cash-flow model, are shown below. Fitch applies the recovery rate stress to the pre-LMI recovery rate to isolate the effect of a change in recovery proceeds at the borrower level. Notes: A1 / A2 / AB / B1 / B2 Rating: AAAsf / AAAsf / AAAsf / AAAsf / BBB+sf Rating sensitivity to increased defaults: Increase defaults by 15%: AAAsf / AAAsf / AAAsf / AA+sf /