Fitch Affirms Vesting Finance Servicing's Dutch Residential and Asset Backed Servicer Ratings
OREANDA-NEWS. Fitch Ratings has affirmed Vesting Finance Servicing B.V. (VFS)'s Dutch servicer ratings as follows:
Residential Primary (Prime) Servicer Rating at 'RPS2-'
Residential Primary (Sub-prime) Servicer Rating at 'RPS2-'
Residential Special Servicer Rating at 'RSS2-'
Asset Backed Primary Servicer Rating at 'ABPS2-'
Asset Backed Special Servicer Rating at 'ABSS2-'
The affirmations reflect VFS's continued ability to maintain performance standards on its secured and unsecured portfolios, while addressing significant organisational changes which have taken place.
Since the last review, VFS has focused on rationalising activities across office locations, finding cost efficiencies and reducing risk exposure. Support functions were merged to the main office in Hilversum, optimising activities across the group. A new sales department was set up to focus on client relationships and improve the servicer's market position.
This corporate strategy led to some changes to the senior management team (SMT) at servicer level. This resulted in a reduction in the average company and role tenure, with seven of the 12 senior members being newly appointed at the time of review. Two of the new appointments were internal promotions, providing some continuity.
Average industry experience across SMT, excluding the supervisory board, also reduced from 13 years as of December 2013 to 10.7 years as of December 2014, which is lower than the average of 17 years seen at peers. Fitch understands that the changes are aimed at creating a leaner more data-driven organisation. However some general concerns remain regarding the potential disruption to the company where such senior management changes take place.
The governance, risk and control (GRC), and internal audit (IA) functions have been decentralised since the last review, with dedicated resources now at servicer level. This has improved monitoring and the mitigation of potential risks, as internal controls continue to develop. A compliance and quality control officer ensures that policy and procedures are consistently applied across the company. VFS continues to be in receipt of the ISAE3402 Type I certification and Type II audit.
In the 18 months to June 2015, VFS's assets under management (AUM) increased to EUR2.63bn from EUR1.87bn as of December 2013. Growth was primarily driven by unsecured loans (around EUR845m). In Fitch's view this growth indicates good market relationships and provides comfort around business' sustainability in the medium term.
To accommodate portfolio growth and the new business strategy, the number of employees at the servicer has increased from 240.7 full-time equivalent (FTE) to 263.2 FTE Industry experience and company tenure are low when compared to other Fitch-rated peers, however the annualised turnover rate and training hours delivered are better than or in line with peers.
In 2014, VFS was invoked as back-up servicer on a portfolio of about 105,000 consumer credit loans. The short invocation time was managed by outsourcing contact activity to a call centre. In Fitch's view the process was well managed. VFS has demonstrated its ability to use flexible resourcing, while maintaining an efficient and controlled process. The servicer can additionally rely on resources from the group when necessary to meet its objectives.
At end-June 2015, VFS's residential primary and special servicing portfolio totalled EUR213.3m (December 2013: EUR301.3m), comprising 4,645 loans (December 2013: 5,159 loans).
The unsecured portfolio totalled EUR2.41bn (December 2013: EUR1.57bn), comprising 212,534 loans (December 2013: 75,430 loans). VFS acts as primary and special servicer on 99% of the unsecured portfolio.
VFS is also the appointed back-up servicer on one unsecured portfolio of EUR467.2m, consisting of 464,982 loans.