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

14 Dec 2015 In Rating Notifications

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

Lagos Nigeria, 14 Dec 2015—Global Credit Ratings has affirmed the national scale ratings assigned to C&I Leasing Plc 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 October 2016.

SUMMARY RATING RATIONALE

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

C&I has a strong brand in the Nigeria leasing industry, having operated in the market for about 24 years. It also has access to broader sources of finance than some competitors, due to its listed status. In addition, over the years the company has benefited from a diverse earnings base (by offering leasing and other ancillary services across various sectors) and a stable management team.

Total shareholders’ funds grew by 5.5% to N6.3bn at FYE14, through internal capital generation, and are considered adequate for the current risk level. While management has put its planned capital restructuring on hold due to unfavourable market conditions, the company is at an advanced stage of raising an additional N2bn, through tranche 2 of its bond Issue programme. The additional capital is needed to support working capital, and particularly to grow the marine business.

The gross non-performing loan (“NPL”) ratio declined to 6.9% at FYE14 (FYE13: 8.2%), albeit underpinned by significant growth in the size of the loan book. Cognisance is taken of the fact that 39.1% growth was recorded in NPLs. However, growth in loans emanated largely from intercompany loans (which accounted for 78.8% of gross loans), which are all performing. Provision coverage of NPLs improved to 62.0% from 52.3% at FYE13.

Despite a challenging operating environment, key profitability metrics improved, as C&I recorded 41.6% growth in pre-tax profit. While a significant improvement was made on the income line (driven by the marine services business), operating expenses also remained elevated, resulting in a cost-to-income ratio of 92.3% in F14 (F13: 93.9%). As such, efficiency measures require strengthening in order to protect the sustainability of earnings. Return on average equity and assets (“ROaE” and “ROaA”) were 5.2% and 1.7% in F14 (F13: 4.9% and 1.5%) respectively.

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 viewed. The rating may be impacted by the company’s inability to contain costs such that this negatively affects profitability.

NATIONAL SCALE RATINGS HISTORY

Initial rating (June 2006)
Long term: BBB(NG); Short term: A3(NG)
Outlook: Stable

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

ANALYTICAL CONTACTS

Primary Analyst
Funmilayo Ojatunwase
.(JavaScript must be enabled to view this email address)
+234 1 462 2545


Committee Chairperson
Dave King
.(JavaScript must be enabled to view this email address)


APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Criteria for rating Banks and Other Financial Institutions, updated March 2015
Global Criteria for Rating Finance and Leasing Companies, updated March 2015
C&I rating reports (2006-14)
Glossary of Terms/Ratios, February 2014


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 2014 (plus three years of comparative numbers), latest internal and/or external auditor’s report to management, full year detailed budget for 2015, and most recent management accounts to 30 June 2015. 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/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.

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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