GCR Affirms Infinity Trust Mortgage Bank Plc’s rating of BB+(NG); Outlook Stable

22 Sep 2016 In Rating Notifications

GCR Affirms Infinity Trust Mortgage Bank Plc’s rating of BB+(NG); Outlook Stable

Lagos Nigeria, 22 September 2016 - Global Credit Ratings has affirmed the national scale credit ratings assigned to Infinity Trust Mortgage Bank Plc of BB+(NG) and A3(NG) in the long term and short term respectively; with the outlook accorded as Stable. The ratings are valid until August 2017.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit ratings to Infinity Trust Mortgage Bank Plc based on the following key criteria:

Infinity Trust Mortgage Bank Plc (“Infinity” or “the bank”) is an enhanced brand among the primary mortgage banks (“PMBs”). The bank has developed from being a niche player to becoming a publicly listed company in 2013 and receiving a national license in 2014. While Infinity is a public company, the bank has one majority shareholder, and as such the key man risk remains a significant issue.

Total shareholders’ funds are considered strong at N5.6bn at FYE15, as the risk weighted capital adequacy ratio (“CAR”) equated to 106.8%, against the regulatory minimum of 10%. Furthermore, Infinity is in discussions with potential investors with the intention of raising additional capital to support its expansion plans and its long term funding needs.

Infinity’s asset quality in terms of the loans and advances portfolio is considered satisfactory, with nil gross non-performing loan (“NPL”) ratio reported in the last two consecutive years (ie, FYE14 and FYE15).

The bank has maintained a strong liquidity profile over the review period, with a cash and liquid assets to short-term funding ratio of 168.2% at FYE15 and averaging 148.6% over the last five years.

Furthermore, positive liquidity buffers were reflected across all maturity buckets of assets and liabilities maturity matching, given large capital balances.

Despite a tough operating environment during F15, Infinity reported a strong profit after tax of N232.2m (although this is a 5.1% decline from F14), and ranks among the highest within the peer group on an absolute basis. Performance was largely driven by an increase in business volumes, particularly in mortgage lending and treasury activities. However, profitability was constrained by the increase in impairment charge (collective provisions raised) and operating expenses (primarily personnel expenses). As a result, the cost to income ratio increased to 61.1% in F15 (F14: 56.7%). Return on average equity and assets (“ROAE and ROaA”) also declined marginally to 4.7% and 3.2% respectively, against 5.0% and 3.4% in F14.

An upward review of the rating may result from a continuous/sustained improvement in profitability, continued strong asset quality metrics, as well as a conservative financial profile. A downward movement in the rating may arise from a significant deterioration in asset quality and/or inability to compete favourably with peers in the industry.

NATIONAL SCALE RATINGS HISTORY

Initial rating (June 2012)
Long term rating: BB+(NG)
Short term rating: A3(NG)
Rating outlook: Stable

Last Rating (September 2015)
Long term rating: BB+(NG)
Short term rating: A3(NG)
Rating outlook: Positive

ANALYTICAL CONTACT

Primary Analyst
Funmilayo Ojatunwase
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
Nigerian Banking Sector Bulletin (2016)
Glossary of Terms/Ratios (February 2016)
Infinity rating reports (2012-15)

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S 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, GCR’S RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLI WEB SITE AT:  HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE ON 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; and 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, Infinity Trust Mortgage Bank Plc, and therefore, GCR has been compensated for the provision of the ratings.

Infinity Trust Mortgage Bank Plc participated in the rating process via face-to-face management meetings, teleconferences 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 Infinity Trust Mortgage Bank Plc with no contestation of/changes to the ratings.

The information received from Infinity Trust Mortgage Bank Plc and other reliable third parties to accord the credit ratings included the audited annual financial statements as at 31 December 2015 (plus four years of comparative numbers), latest internal and/or external audit reports to management, full year detailed budget for 31 December 2016 and management accounts to 30 June 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/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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