GCR Affirms C&I Leasing Plc’s issuer rating of BBB-(NG); Outlook Stable.

16 Dec 2016 In Rating Notifications

GCR Affirms C&I Leasing Plc’s issuer rating of BBB-(NG); Outlook Stable.

Lagos Nigeria, 16 December 2016 — Global Credit Ratings has affirmed the national scale issuer ratings assigned to C&I Leasing Plc of BBB-(NG) and A3(NG) in the long and short term respectively; with the outlook accorded as Stable. The ratings are valid until October 2017.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit ratings to C&I Leasing Plc (“C&I” or “the Group”) based on the following key criteria:

The ratings reflect C&I’s strong market presence in Nigeria, underpinned by its long operational history spanning 25 years, as well as its listed status (being the only listed leasing company in Nigeria), which increases its accessibility to broader sources of finance relative to most peers. Note is also taken of the Group’s experienced management team and diversified portfolio.

C&I is considered to be adequately capitalised for its current risk level, with risk weighted capital adequacy ratio of 20.2% at FYE15 (FYE14: 26.5%), remaining above the prudential threshold of 12.5%. The shareholders’ funds reduced by 2.0% to N5.7bn at FYE15, before rising to N9.3bn at 30 September 2016 (“3Q F16”). The movements were driven by net exchange differences arising from translation of foreign operations and foreign currency denominated loan balances. Furthermore, the total capital to total assets ratio dropped to 19.4%, while gross gearing rose to 320.9% due to the rise in debt profile. However, the ratios had improved at 3Q F16, registering at 23.3% and 246.5% respectively.

The non-performing loan ratio for loans and receivables reduced to 3.2% at FYE15, down from 6.0% at FYE14, supported by improved loan recovery efforts. Impaired loans and receivables are mainly staff loans. However, the impaired assets within other assets (including trade and other receivables) remained elevated at N1.6bn. Overall, provision coverage of gross impaired assets lowered to 58.4% at FYE15 (FYE14: 69.9%).

C&I reported a resilient performance in F15 despite the tough operating conditions, posting a pre-tax profit of N465.6m (F14: N411.8m). The growth was driven by a sustained increase in earnings from marine, fleet and outsourcing business, though moderated by significant loss recorded by C&I Motors. While the results as of 3Q F16 indicate that the full year budget is unlikely to be achieved, management has increased its efforts with regard to operational efficiency through cost management, superior customer service and diversification of earnings to support profitability.

An upward movement in the ratings or outlook may follow evidence of improved and sustained profitability metrics and asset quality. Enhanced ability to access less expensive sources of funding would also be positively considered. However, the ratings may be impacted by the company’s inability to contain costs such that this negatively affects profitability.

NATIONAL SCALE ISSUER RATINGS HISTORY

Initial rating (June 2006)
Long term: BBB(NG)
Short term: A3(NG)
Rating outlook:  Stable

Last rating (November 2015)
Long term: BBB-(NG)
Short term: A3(NG)
Rating outlook: Stable


ANALYTICAL CONTACTS

Primary Analysts
Femi Atere/Julius Adekeye
Credit Analyst/Senior Credit Analyst
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Committee Chairperson
Dave King
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Criteria for Rating Banks and Other Financial Institutions, updated March 2016
Global Criteria for Rating Finance and Leasing Companies, updated March 2016
C&I rating reports (2006-15)
Glossary of Terms/Ratios (February 2016)


RATING LIMITATIONS AND DISCLAIMERS

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/RATINGS-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 AT WWW.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 a maximum of 12 months, or earlier as indicated by the applicable credit rating document.


The ratings were solicited by, or on behalf of, C&I Leasing Plc, and therefore, GCR has been compensated for the provision of the ratings.

C&I Leasing Plc 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 C&I Leasing Plc with no contestation of/changes to the ratings.

The information received from C&I Leasing Plc and other reliable third parties to accord the credit ratings included the latest audited annual financial statements at 31 December 2015 (plus four years of comparative numbers), latest internal and/or external auditor’s report to management, full year detailed budget for 2016, and most recent management accounts to 30 September 2016. In addition, 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/RATINGS-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.

 

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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