OREANDA-NEWS. Fitch Ratings has affirmed four classes of notes from three Pinnacle series. The transactions are securitisations of Australian conforming residential mortgages originated by Police & Nurses Limited, trading as P&N Bank. The rating actions are as follows:

Pinnacle Series Trust 2010-T1 (Pinnacle 2010):

AUD41.7m Class A2 (ISIN AU3FN0012274) affirmed at 'AAAsf'; Outlook Stable

AUD5.5m Class AB (ISIN AU3FN0012282) affirmed at 'AAAsf'; Outlook Stable

Pinnacle Series Trust 2013-T1 (Pinnacle 2013):

AUD92.9m Class A (ISIN AU3FN0020624) affirmed at 'AAAsf'; Outlook Stable

Pinnacle Series Trust 2014-SST (Pinnacle 2014):

AUD489.5m Class A (ISIN AU3FN0022190) affirmed at 'AAAsf'; Outlook Stable

KEY RATING DRIVERS

The affirmations reflect Fitch's view that available credit enhancement supports the notes' current ratings, the agency's expectations of Australia's economic conditions and that the credit quality and performance of the loans in the collateral pools remain within the agency's expectations.

As per the APAC Residential Mortgage criteria, the default model was not run for Pinnacle 2013, as a review of pre-determined performance triggers indicates the transaction displays stable asset performance. The default model was run for the Pinnacle 2010 and Pinnacle 2014 transactions.

The Pinnacle 2010, Pinnacle 2013 and Pinnacle 2014 transactions' 30+ day arrears were 1.60%, 1.29% and 0.84%, respectively, at 31 May 2016, compared with Fitch's 4Q15 Dinkum RMBS Index of 0.95%. The underlying pools are covered by lenders' mortgage insurance (LMI), provided by Genworth Financial Mortgage Insurance Pty Limited (Insurer Financial Strength: A+/Stable) and QBE Lenders' Mortgage Insurance Limited (Insurer Financial Strength: AA-/Stable). The underlying pool for the Pinnacle 2010 and Pinnacle 2013 transactions have 100% LMI coverage, while the Pinnacle 2014 transaction has 25.5% coverage.

Losses remain low since closing, with just one loss of AUD29,004 in Pinnacle 2010, which was fully covered by LMI. Pinnacle 2013 and Pinnacle 2014 transactions have not experienced any losses since closing. All three pools are highly concentrated in Western Australia, with more than 90% of mortgages in the portfolio secured over properties in the state.

The Pinnacle 2014 transaction has a 10-year revolving period, of which less than eight years remain. Fitch regards the long revolving period as acceptable, because the transaction has portfolio parameters, the portfolio stratifications have not changed significantly since initial issue and the portfolio is performing as expected.

RATING SENSITIVITIES

Sequential pay-down has increased credit enhancement for the senior notes of the Pinnacle 2010 and Pinnacle 2013 transactions, with the rated notes able to withstand multiples of the latest reported arrears. Fitch does not expect modest changes in performance to affect the ratings. The rated notes for all the transactions are independent of downgrades of the LMI providers' ratings.

For Pinnacle 2010, Fitch's 'AAAsf' breakeven stressed default rate is 10.5%. The class A2 and AB notes can withstand an additional 78.3% and 25.3%, respectively, in defaults at Fitch's 'AAAsf' loss severity.

For Pinnacle 2014, Fitch's 'AAAsf' breakeven stressed default rate is 19.5%. The class A notes can withstand an additional 8.1% in defaults at Fitch's 'AAAsf' loss severity.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch conducted a file review of 10 sample loan files focusing on the underwriting procedures conducted by P&N Bank compared to its credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would affect Fitch's rating analysis.

A comparison of the transaction's representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the reports under Related Research below.