OREANDA-NEWS. Fitch Ratings has affirmed three classes of notes from two 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):
AUD55.4m Class A2 (ISIN AUFN0012274) affirmed at 'AAAsf'; Outlook Stable; and
AUD7.3m Class AB (ISIN AU3FN0012282) affirmed at 'AAAsf'; Outlook Stable.

Pinnacle Series Trust 2013-T1 (Pinnacle 2013):
AUD133.5m Class A (ISIN AU3FN0020624) affirmed at 'AAAsf'; Outlook Stable.

KEY RATING DRIVERS
The affirmations reflect Fitch's view that the available credit enhancement is able to support the Class A notes' current ratings, the stable credit quality and performance of the pools, and Fitch's expectations of Australia's economic conditions.

Arrears are 0.82% and 1.26% for Pinnacle 2010 and Pinnacle 2013, respectively. The pool is relatively well seasoned in both transactions at over five years and as a result, Fitch's calculated weighted average indexed loan to value ratio (LVR) is 51.4% and 47.8% for Pinnacle 2010 and Pinnacle 2013, respectively, compared to 56.2% and 53.4% before indexation. The pool is highly concentrated in Western Australia, with respectively 94.5% and 93.6% of mortgages in the portfolio secured over properties in the state.

Pinnacle 2010 stepped-up to pro-rata amortisation, following the doubling of Class AB's credit enhancement at the July 2014 payment date. It is expected to revert to sequential pay once the note balance reaches 10% of the original note balance. Pinnacle 2013 is still paying down sequentially as it is still within 24 months from the closing date.

From closing to 31 May 2015 there has been just one recorded loss in Pinnacle 2010 which was fully covered by lender's mortgage insurance (LMI). No loss has been recorded yet in Pinnacle 2013. The pools are fully covered by LMI with QBE Lenders' Mortgage Insurance Limited (Insurer Financial Strength Rating: AA-/Stable) covering 81-84% of the pools, and Genworth Financial Mortgage Insurance Pty Ltd (Insurer Financial Strength Rating: A+/Stable) covering the remaining.

An initial liquidity draw related to the accrued interest adjustment at closing for Pinnacle 2010 has been fully reimbursed. Similarly, an initial principal draw for Pinnacle 2013 has been fully repaid. Since reimbursement of both draws excess spread has been stable for both transactions.

RATING SENSITIVITIES
The Class A notes of both transactions are LMI independent. Fitch's 'AAAsf' breakeven stressed default rate is 10.77% for Pinnacle 2010. The Class A2 notes can withstand an additional 76.34% in defaults at Fitch's 'AAAsf' loss severity. The Class AB notes can withstand an additional 24.82% in defaults. For the Pinnacle 2013 transaction, Fitch's 'AAAsf' breakeven stressed default rate is 11.14%. The Class A notes can withstand an additional 63.43% 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 P&N Bank's 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 impact 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 and/or links given under Related Research below.