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Heritage and People’s Choice secures $1bn RMBS deal

The $1 billion residential mortgage-backed security program is the inaugural transaction for the recently merged mutual bank.

The newly united mutual bank Heritage and People’s Choice has secured its first-ever residential mortgage-backed security (RMBS) issuance, priced at $1 billion.

The lender, which was formed through a union of Queensland-based Heritage Bank and Adelaide-based People’s Choice Credit Union, said the transaction – comprising seven tranches – was originally launched at $600 million but after being oversubscribed 1.9 times on the Class A note, was upsized to $1 billion.

The transaction was issued through Heritage and People’s Choice’s Light Trust securitisation program, with the Class A notes priced at 117 bps above the bank bill swap rate (BBSW), with the transaction offering full prudential capital relief.

Chief executive of Heritage and People’s Choice, Peter Lock, stated: “There was extremely strong investor support for what is effectively our first foray into the capital markets as a merged entity.

“We received an excellent response from all stakeholders during the process, reflecting confidence in our new organisation and what we are building. We have a high-quality retail banking proposition and a clear strategy.”

NAB was the arranger of the transaction with ANZ, Westpac, and Macquarie Bank acting as joint lead managers.

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The $1 billion RMBS deal comes after the customer-owned bank reported its combined residential mortgage book grew to $18.4 billion in the months since the merger.

Mr Lock revealed that shortly after the merger, the combined entity went “out to the market to speak to debt investors around Australia and those discussions were very positive”.

“We are a mortgage specialist and will be a vigorous competitor, offering Australians a true alternative to the big, listed banks,” he said.

Heritage and People’s Choice’s head of lending Nic Savage confirmed that residential mortgages would continue to be a strong focus following the merger.

Mr Savage said: “As continuing financial pressure builds for borrowers during this period of increasing interest rates and cost of living pressures, mutual banks like Heritage and People’s Choice provide a genuine alternative to the listed for-profit banks.”

The mutual merger

The merger between Heritage Bank and People’s Choice Credit Union was first revealed in 2021 when the two mutual banks entered into a non-binding agreement to explore a merger opportunity.

By mid-2023 the two organisations had merged to create a national member-owned banking entity, comprising 720,000 members; 1,900 employees; $23 billion in assets; and 95 branches across South Australia, Victoria, NSW, Queensland, and the Northern Territory.

At the announcement of the newly created group, it was revealed Mr Lock, former CEO of Heritage Bank, would take charge of the entity, with People’s Choice former CEO Steve Laidlaw to act as deputy until Mr Lock retires “18 months after the establishment of the merged organisation”.

The group is running dual head offices, one in Adelaide and one in Toowoomba, and has committed to no closures of existing branches due to the merger.

[Related: Heritage and People’s Choice mortgage book exceeds $18bn]

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