GCR Assigns Imperial Homes Mortgage Bank Limited a Rating of BBB-(NG); Outlook Stable.

23 Jan 2017 In Rating Notifications

GCR Assigns Imperial Homes Mortgage Bank Limited a Rating of BBB-(NG); Outlook Stable.

Lagos, 15 December 2016—Global Credit Ratings has accorded Imperial Homes Mortgage Bank Limited (“Imperial Homes” or “the bank”) a first time, national scale ratings 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 based on the following key criteria:

The rating reflects Imperial Homes’ long operational history of over two decades in Nigeria, albeit brand prominence remains low (as the bank has traded under four brand names since its inception due to ownership changes).

Imperial Homes’ capitalisation level (reflected by a risk weighted capital adequacy ratio of 37.2% at FYE15) is considered satisfactory. The bank has maintained stable growth in capital over the five year review period (to FYE15), underpinned by steady internal capital generation. Imperial Homes’ total capital (after deduction of intangible assets) of N5.9bn at FYE15 compares favourably with the N5bn statutory floor set for its license category by Central Bank of Nigeria (“CBN”).

Imperial Homes displayed strong asset quality (in the loans and advances portfolio) in the three year period to FYE15, maintaining a non-performing loan (“NPL”) ratio of less than 3% throughout the period, and ending F15 with a gross NPL ratio of 1.3%, well below the peer average. However, the provisioning level appears low, with arrears coverage by specific provisions of 26.8% at 31 December 2015. Despite the low arrears coverage position, the risk of capital erosion is considered minimal, considering the modest net NPL/capital ratio of 1.5%.

Imperial Homes displayed a good profitability track record in the five year period to F15. Total operating income improved by 59.6% to N1.5bn in F15, with both funded and non-funded revenue ending stronger. Although operating expenses rose by 34.8% to N701m in F15, the outpacing growth in revenue saw the post-tax profit improve by 194.0% to N625.8m, translating to a stronger ROaE of 11.1% (F14: 4.1%) and ROaA of 3.5% (F14: 1.4%) respectively.

A significant improvement in the bank’s brand visibility and market share, in addition to maintaining and sustaining a satisfactory profitability track record. A negative rating action may follow a decline in financial performance, significant decline in market share, as well as deterioration in asset quality.

NATIONAL SCALE RATINGS HISTORY

Initial/last rating (not applicable)
Long term: (first time/new rating)                       
Outlook: (first time/new rating)                           
                                                             
ANALYTICAL CONTACTS
Primary Analyst                                        Committee Chairperson   
Julius Adekeye                                           Dave King
+23 41 462 2545                                         .(JavaScript must be enabled to view this email address)
.(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 Banking Sector Bulletin, 2016
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

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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, Imperial Homes Mortgage Bank Limited, and therefore, GCR has been compensated for the provision of the ratings.

Imperial Homes Mortgage Bank Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.

The credit ratings above were disclosed to Imperial Homes Mortgage Bank Limited with no contestation of/changes to the ratings.

The information received from Imperial Homes Mortgage Bank Limited and other reliable third parties to accord the rating included the audited annual financial statements of Imperial Homes Mortgage Bank Limited for five years, up to 31 December 2015, unaudited interim management accounts to 30 September 2016, as well as detailed information related to the bank’s operations.

 

 

 

 

 

 

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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