TRADE FINANCE | Tony Chua, Australia

NAB sets eyes on US investors in RMBS Issue

The lender keen to woo American investors with Australian mortgages in the belief that foreigners are confident in the Australian housing market.

National Australia Bank Ltd., one of the country's biggest lenders, is planning to test the appetite of U.S. based investors through an offer of residential mortgage-backed securities that includes a U.S. dollar tranche, the first such issue by the bank since 2006.

The offer--which the bank hopes will raise at least A$750 million (US$731.92 million) but could be upsized--breaks a two-month drought in local RMBS supply. It also comes during a volatile period for bank funding costs as investors remain nervous on the worsening outlook for Europe's debt crisis.

Australia's banks typically lean heavily on global wholesale funding markets but have been able to steer clear of public borrowing during the recent burst of turbulence as lending growth slows and cash deposits continue to increase.

Issuance of RMBS in Australia has recovered since the depths of the 2008 crisis at a pace well ahead of the country's developed-economy peers but remains below volumes seen in the lead-up to the 2007 credit crunch.
NAB's offer is backed by around 2,500 home loans all originated and serviced by the bank itself. The National RMBS Trust 2011-2 is the second RMBS issue by NAB in 2011. The offer is made up of Class A notes split between U.S. dollar floating-rate 2-year soft bullet Class A1 notes aimed at U.S.-based institutional investors and Australian dollar 3-year amortizing Class A2 notes.

Eva Zileli, a senior manager in group funding at the Melbourne-based lender, said the country's still-low unemployment rate and a robust housing market where default rates remain low have given NAB an opportunity to diversify its funding base through foreign investors.

View the full story in The Wall Street Journal.

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