Book growth drives strategy at Resimac

Andrew Marsden, general manager, treasury and securitisation at Resimac in Sydney, discusses the firm’s growth ambitions, the consequences of becoming a listed company, and its engagement with securitisation sectors outside Australia – including in the emerging New Zealand market.

How has Resimac’s merger with Homeloans, which took place late in 2016, affected the business? Has there been a significant impact on origination and funding volume?

We have had a growth strategy over the last five years which entails organic and inorganic growth. The first public transaction we completed was the RHG acquisition in 2013/14. This enabled us to bulk up our Australian mortgage book.

The Homeloans merger was a distribution play for the core mortgage business. It was undertaken to broaden access to the various distribution channels in the Australian market. We have been successful in expanding our footprint in the market, and we now probably have one of the wider reaches across prime and nonconforming products of all the nonbanks.

In which area are you currently seeing most potential for growth, and why?

As evidenced in our results, it is clear that the largest growth area for Resimac is in the prime space. Since the third and fourth quarter of 2015, when the major banks began experiencing increasing regulatory risk-capital requirements for their mortgage portfolios, we have been able to be product and price competitive in the prime market. This was another benefit of the merger with Homeloans.

Nonconforming is intrinsically a countercyclical market, particularly with high-yielding, high-risk products. We have been able to carve out a defined niche of the broader specialist-lending market in Australia, particularly in the near-prime space.

Did the transparency requirements of being a nonbank prepare Resimac well for becoming a listed company?

The transparency most nonbanks manage in the Australian market is driven by funding strategy, in that they are originating into a secured-funding model. This results in publicly rated structures, which means nonbanks need to be transparent with their core asset and liability structures.

We have always been a public company, which offers a degree of transparency of itself, but listing increases public access to information. The internal governance hasn’t been a big stretch from the way the company had been run previously.

Resimac has priced prime and nonconforming US dollar securitisation tranches in 2018. How does demand differ?

It hasn’t differed much from a marketing or investor-participation perspective. Pepper Group has done a very good job in laying the foundation for Australian nonconforming product into the US 144A market and we have been able to benefit from this.

The key point is the way in which Australian nonconforming residential mortgage-backed securities (RMBS) are structured. They offer a lot of credit and cashflow protection and support to investors, and there is a strong relative-value argument particularly for the senior tranches. This is what US investors that participated in our recent Bastille nonconforming trade recognised. The majority were existing investors in our Premier programme.

It is also worth noting that Liberty Financial has similar resonance with European investors. It is a combination of marketing and being consistent, but it is also a reflection of the strength of Australian nonconforming structures.

Resimac has also previously issued RMBS in New Zealand. What is the strategy in this jurisdiction?

We are very positive about the development of the New Zealand primary-issuance market and we aim to be a regular issuer there. Our underlying business in New Zealand encompasses prime and nonconforming origination. We see good growth opportunities as a nonbank and we will be looking to bring another New Zealand RMBS deal to market within the next six months.

We participated in the working groups for the Reserve Bank of New Zealand (RBNZ)’s proposed “simple, transparent and comparable” changes. We understand the RBNZ’s objectives but we are cautious on the possible unintended consequences of standardising structural parts of the debt markets, particularly given the risk it could bifurcate the issuance market.

We are very supportive of the standardisation data templates and we do think there are positive initiatives currently under way.