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According to non-bank lender Firstmac, it has “dispelled fears about weakness” in the residential mortgage-backed security (RMBS) market through the successful pricing of a $1.2 billion issue.
This latest issue brought the total amount of RMBS issued by the non-bank lender since 2003 to over $42 billion.
Firstmac CFO James Austin stated the issue’s success reflected that the market had finally recovered following 12 months of weakness.
“There’s a strong rally underway with very strong demand for paper which is reflected in the much lower rate we paid for this issue than our issue last year,” Mr Austin said.
“The lower rates reflect confidence in the quality of Firstmac’s loan book specifically and also renewed investor confidence that Australian borrowers more broadly are safe as they continue to demonstrate their resilience in the face of 12 consecutive Reserve Bank of Australia (RBA) rate hikes.”
The non-bank lender further stated that the issue price of +130 over the Bank Bill Swap Rate (BBSW) “compared favourably” to the +153 over BBSW for Firstmac’s prior benchmark issue in October 2022 at the beginning of the central bank’s tightening cycle.
Mr Austin boasted confidence in the quality of the non-bank lender’s loan book and provided monthly data on its loan book to investors.
“This demonstrates how strong our credit quality is with 30-plus day arrears less than 0.50 per cent, much lower than the vast majority of banks,” Mr Austin stated.
According to the CFO, the latest RMBS issue would go towards funding Firstmac’s operations in a home loan market that’s normalising following a period of “heavy discounting caused by the now-terminated federal government’s Term Funding Facility”.
“This issue means we’ll continue to have a forceful presence in the lending market, offering a real alternative to the big banks,” Mr Austin concluded.
Substantial stake in BNK
Earlier this year, BNK Banking Corporation Limited (BNK) announced Firstmac had increased its stake in the business to 19.9 per cent, making the non-bank lender a substantial shareholder.
The move came after two non-executive directors, which included BNK non-executive director and major shareholder John Kolenda, made the decision to reduce some of their shareholdings in the business.
Mr Kolenda sold the majority of his shareholding, which reduced his stake in the company from 12.06 per cent to about 0.15 per cent. The value of his shares was around $9.8 million.
Mr Kolenda subsequently stepped down from the BNK board.