Article republished with permission from Structured Credit Investor
by Matthew Manders
Monday 16 June 2025 | 10:43 London
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Bank retreat diversifying securitisation landscape
The Australian ABS market is undergoing a period of transition, driven by reduced activity from major banks, growing participation from non-bank lenders and a slow but steady evolution in green securitisation. These themes were discussed during the Australian Securitisation Forum’s recent London Investor Seminar, during which speakers discussed funding dynamics, environmental risk considerations and consumer resilience amid tightening financial conditions.
A key trend identified by panellists at the event was the retreat of major banks from regular ABS issuance, allowing non-bank lenders to expand their role in the Australian securitisation market. “We’ve had to ensure we maintain a strong funding base,” one speaker commented. “We don’t focus on the fringe or non-conforming space; we target prime borrowers and compete directly with the banks.”
The shift has helped diversify the Australian ABS landscape, while increased investor interest has supported the funding outlook. “Markets have been very receptive. We’re seeing more offshore investors looking closely at Australia,” the panellist added, highlighting continued appetite for the country’s high-quality, transparent ABS structures.
Meanwhile, green securitisation is emerging as a developing theme. The Australian government has introduced tax incentives for EVs, resulting in an uptick in EV originations and gradual changes in collateral pools to reflect this.
One issuer noted a marked shift in investor expectations: “When we did our first deal, only 3% of the portfolio was EVs. Now that figure is 15%-16%, largely in response to investor demand for ESG-aligned exposure.”
However, this transition has not been without challenges. Rating agencies are still cautious about EV residual values, with some imposing haircuts that affect overall deal economics.
“It has been an interesting dynamic. You’ve got investors pushing for more EV content, but rating agencies are still sceptical,” the issuer added.
The evolution of EV securitisation will likely depend on the availability of further data around vehicle performance and secondary market behaviour.
Despite macroeconomic concerns, the Australian ABS market continues to be underpinned by strong asset performance. While the Reserve Bank of Australia has trimmed its policy rate to 3.5% as of May, affordability and consumer stress remain live concerns. Still, panellists reported robust transaction performance and limited impact on underlying credit quality.
“The Australian consumer has proven incredibly resilient,” said one speaker. “Income tax cuts and government utility support have helped keep households afloat. And from a structural standpoint, the speed at which these deals amortise adds another layer of protection.”
In the auto ABS space in particular, structural safeguards remain solid. “Even if arrears pick up slightly, there are so many embedded buffers that the risk of actual losses remains extremely low,” the panellist said.
As 2025 progresses, the Australian ABS market finds itself at a crossroads of innovation and resilience. With new issuers stepping up, ESG demands increasing, and consumers holding steady, the outlook remains cautiously optimistic, provided that investor confidence and policy support continue to align.