GCR Accords Sterling Asset management and trustees Limited a National Scale Rating of BBB-(NG); Outlook Stable.

25 Aug 2017 In Rating Notifications

GCR Accords Sterling Asset management and trustees Limited a National Scale Rating of BBB-(NG); Outlook Stable.

Lagos, 25 August 2017—Global Credit Ratings has accorded Sterling Asset Management and Trustees Limited national scale ratings of BBB-(NG) and A3(NG) in the long term and short term respectively; with the outlook accorded as Stable.  The ratings are valid until June 2018.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit ratings based on the following key criteria:

The ratings reflect the established operational track record of Sterling Asset Management and Trustees Limited’s (“SAMTL”, “the company”) in Nigeria of over 20 years. The company’s adequate capitalisation, strong liquidity, and bias in its asset management operations also support the ratings.

SAMTL has maintained consistent growth in its shareholders’ funds over the five year review period to FY16, underpinned by internal capital generation. The company registered 19.7% growth in total capital to N4.5bn at FY16, equating to 10x the minimum statutory requirement.

SAMTL’s liquidity risk has been largely mitigated through matching of asset/liability maturities, with a sizable liquidity buffer of N7.9bn maintained in the ‘less than one year’ maturity band at FY16. Furthermore, the company’s liquid and trading assets/total assets ratio of 65.2% at FY16 is considered strong.

SAMTL’s asset quality with regards to loan and advances portfolio is considered satisfactory, with a non-performing loan (“NPL”) ratio of 4.1% at FY16 (FY15: 3.4%). Although the NPL ratio increased relative to FY15’s level, this was solely due to declines in advances. Specific provisioning levels were considered satisfactory, with arrears fully covered, while the risk of capital erosion is mitigated by the negative net NPL to capital position.

In as much as SAMTL remained profitable in the five year review period to FY16, the company was negatively impacted by the prevailing tough market conditions, and recorded significant 38.1% and 92.4% declines in interest and net interest income during the year respectively. Nevertheless, performance at the total operating income level was lifted by a gain on the sale of property (contributing 79.2% of the reported TOI). Cost tightening measures introduced by management delivered a 13.9% reduction in operating expenses, resulting in pre-tax profit growth of 4.3%. Consequently, both the ROaE and ROaA improved to 18.3% and 4.3% in FY16 (FY15: 11.3% and 2.5%) respectively.

A satisfactory improvement in the company’s market share, financial performance, in addition to maintaining and sustaining strong asset quality (in the advances portfolio) could trigger a positive rating action. A negative rating action may follow weakening brand acceptance, and significant negative pressure on asset quality and profitability.

 

NATIONAL SCALE RATINGS HISTORY

Initial rating (November 2014)                                         
Long term: BBB-(NG)                                                         
Short term A3(NG)
Outlook: Stable                                        

Last rating (November 2015^)                                       
Long term: BBB-(NG)                                                                                             
Short term A3(NG)
Outlook: Stable            

^Expired in November 2016.

 

                                                             
ANALYTICAL CONTACTS
Primary Analyst                                        
Julius Adekeye                                          
+23 41 462 2545                                        
.(JavaScript must be enabled to view this email address) 
                 
Committee Chairperson    
Dave King
.(JavaScript must be enabled to view this email address)

 

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Criteria for Rating Bank and Other Financial Institutions, updated March 2016

Nigerian Financial Institutions Overview (2017)

SAMTL rating reports (20114-16)

Glossary of Terms/ Ratios (February 2016)

 

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK:  HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.COM.NG.

 

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for 12 months, or as indicated by the applicable credit rating document.

The ratings were solicited by, or on behalf of Sterling Asset Management and Trustees Limited, and therefore, GCR has been compensated for the provision of the ratings.

Sterling Asset Management and Trustees Limited participated in the rating process via face-to-face management meetings and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit ratings above were disclosed to Sterling Asset Management and Trustees Limited with no contestation of/changes to the ratings.

The information received from Sterling Asset Management and Trustees Limited and other reliable third parties to accord the credit rating included the company’s 31 December 2016 audited annual financial statements (in accordance with IFRS) plus four years of comparative figures. In addition, other information specific to the rated entity and/or industry was also received.

 

 

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

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