Fitch Ratings has upgraded two and affirmed three classes of notes from two Auswide transactions.

The transactions - ABA Trust 2017-1 and WB Trust 2014-1 - consist of notes backed by pools of first-ranking, Australian conforming full-documentation residential mortgage loans originated by Auswide Bank Ltd (BBB+/Stable). The notes were issued by Perpetual Corporate Trust Limited in its capacity as trustee.

After the publication of the updated APAC Residential Mortgage Rating Criteria on 2 June 2022, the class B and C notes of WB 2014-1 were placed Under Criteria Observation (UCO) on 6 June 2022. The upgrades to the class B and C notes and their removal from UCO are mainly driven by Fitch's application of the updated criteria, namely the reduction of the large obligor concentration test, which previously constrained the ratings of the notes.

RATING ACTIONS

Entity / Debt

Rating

Prior

WB Trust 2014-1

A AU3FN0025151

LT

AAAsf

Affirmed

AAAsf

AB AU3FN0025169

LT

AAAsf

Affirmed

AAAsf

B AU3FN0025177

LT

AAAsf

Upgrade

AA+sf

C AU3FN0025185

LT

AAAsf

Upgrade

AA-sf

ABA Trust 2017-1

A AU3FN0036745

LT

AAAsf

Affirmed

AAAsf

Page

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VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Resilient Asset Performance: The transactions' 30+ day and 90+ day arrears were in line or below Fitch's 1Q21 Dinkum RMBS index at end-May 2022. WB 2014-1's 30+ day arrears tracked in line with the 1Q22 Dinkum RMBS index of 0.92%, while ABA 2017-1's was below at 0.25%. Both transactions have zero 90+ day arrears, below the index's 0.52%. The arrears figures exclude loans with a hardship status that are not in arrears. Losses across all transactions have continued to remain low, with all losses fully covered by lenders' mortgage insurance (LMI) or excess spread.

The 'AAAsf' weighted-average foreclosure frequency (WAFF) for WB 2014-1 is 9.4%, driven by the weighted-average (WA) unindexed loan/value ratio (LVR) of 48.1%. The LMI-dependent 'AAAsf' WA recovery rate (WARR) of 73.9% is driven by the portfolio's WA indexed scheduled LVR of 43.5% and 100% of the pool benefiting from LMI. The updated asset and cashflow models were not rerun for ABA 2017-1, in accordance with Fitch's APAC Residential Mortgage Rating Criteria.

Credit Enhancement Supports Ratings: All 'AAAsf' rated notes have subordination that is at least 2.4x the 'AAAsf' portfolio loss from the most recent model run. Both transactions are paying down pro rata, and will revert to sequential pay if performance deteriorates or the transactions reach the clean-up call date.

Structural features include liquidity reserves sized at 1% of the asset balances with a floor of AUD300,000 and WB Trust currently has an over-collaterisation reserve ledger of AUD1.2 milllion, which provides credit support to the rated notes.

Low Operational Risk: Auswide is an authorised deposit-taking institution headquartered in Bundaberg, Queensland. Fitch undertook an operational review and found that the operations of the servicer were comparable with those of other Australian conforming lenders and there were no material changes that may affect the servicer's ongoing ability to undertake administration and collection activities.

Economic Rebound Supports Outlook: The Stable Outlook is supported by Australia's ongoing recovery. We expect the country's strong labour market and GDP growth to support transaction performance, despite our forecast that interest rates will reach 1.85% and inflation 5.5% by the year-end. We expect GDP to expand by 4.0% in 2022, with an unemployment rate of 3.9%. GDP growth and inflation should normalise to 2.5% and 2.1%, respectively, in 2023, with an unemployment rate of 4.0%, while we forecast interest rates to reach 2.50%.

The loans in the transactions are concentrated in Queensland (AA+/Stable), reflecting Auswide Bank's operational focus in the region. Fitch expects the state's economy to continue to recover from the effects of the Covid-19 pandemic. The rating on Queensland reflects the diversity and underlying strength of the local economy.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

The transaction's performance may be affected by changes in market conditions and the economic environment. Weakening asset performance is strongly correlated with increasing levels of delinquencies and defaults that could reduce credit enhancement available to the notes.

Downgrade Sensitivity

Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case and are likely to result in a decline in credit enhancement and remaining loss-coverage levels available to the notes. Decreased credit enhancement may make certain note ratings susceptible to negative rating action, depending on the extent of the coverage decline. Hence, Fitch conducts sensitivity analysis by stressing a transaction's initial base-case assumptions.

The rating sensitivity section provides insight into the model-implied sensitivities the transaction faces when assumptions - WAFF or WARR - are modified, while holding others equal. The modelling process uses the modification of default and loss assumptions to reflect asset performance in up and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors.

Fitch's previous rating sensitivities for ABA 2017-1 were discussed in 'Fitch Assigns Final Ratings to ABA Trust 2017-1', published on 28 June 2017.

Downgrade Sensitivity (WB Trust 2014-1)

Note: A /AB / B/ C

Rating: AAAsf / AAAsf / AAAsf / AAAsf

Increase defaults by 15%: AAAsf / AAAsf / AAAsf / AAAsf

Increase defaults by 30%: AAAsf / AAAsf / AAAsf / AAAsf

Reduce recoveries by 15%: AAAsf / AAAsf / AAAsf / AAAsf

Reduce recoveries by 30%: AAAsf / AAAsf / AAAsf / AAAsf

Increase defaults by 15% and reduce recoveries by 15%: AAAsf / AAAsf / AAAsf / AAAsf

Increase defaults by 30% and reduce recoveries by 30%: AAAsf / AAAsf / AA+sf / AA+sf

The transaction structure supports LMI-independent ratings for the class A, AB and B notes. LMI is not required to support the ratings due to the level of credit support provided by the lower notes.

The class C notes can withstand a two-notch downgrade of the LMI providers' ratings.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

The rated notes are at 'AAAsf', which is the highest level on Fitch's scale. The ratings cannot be upgraded.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to the rating action on both transactions.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information as part of its ongoing monitoring.

Prior to the transaction closing, Fitch sought to receive a third-party assessment conducted on the asset portfolio information, but none was made available to Fitch for these transactions.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

Additional information is available on www.fitchratings.com

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