AFG continues run with $1.2bn mortgage-backed securitisation

Australian Finance Group (AFG) has priced a $1.2 billion Prime Residential Mortgage-Backed Securities (RMBS) transaction through its funding subsidiary, AFG Securities.

The deal drew demand from both domestic and international investors and is expected to settle on 29 September.

AFG chief executive David Bailey (pictured) said the transaction marked another important milestone for the company.

"We are very pleased with the response to this transaction and the breadth of engagement from investors in Australia and international markets," he said. "This transaction further supports the strength and diversity of our funding program and provides an important foundation for AFG Securities to continue delivering competitive home loan solutions for AFG brokers and their customers."

A big year for the funding arm

The new deal matches the size of AFG's previous $1.2 billion Prime RMBS issuance in February, which at the time was the largest RMBS issue to date for the ASX-listed lender and mortgage aggregator, after being upsized from $750 million.

That February transaction drew engagement from more than 30 domestic and offshore investors, including four new investors.

The latest pricing is AFG's 21st term transaction, taking total issuance to $13.1 billion, with more than half of AFG Securities' outstanding funding now sourced from long-term RMBS. 

It reflects a broader shift in how the aggregator funds its book: AFG Securities funds loans directly off AFG's own balance sheet through warehouse facilities and RMBS issuances, rather than taking out wholesale finance, therefore letting the group capture net interest margin rather than a commission

The AFG Securities book has grown 30% over the year to a record $7.1 billion.