GCR Assigns Imperial Homes Mortgage Bank Limited a Rating of SQ3+(NG); Outlook Stable.

23 Jan 2017 In Rating Notifications

GCR Assigns Imperial Homes Mortgage Bank Limited a Rating of SQ3+(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 servicer quality rating# of SQ3+(NG); with the outlook accorded as Stable.  The rating is valid until October 2017.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above servicer quality rating based on the following key criteria:

The primary servicer quality rating accorded to Imperial Homes reflects its 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), with servicing experience thus far limited to self-originated mortgages (managed from cradle to grave).

Staffing levels across the key functions is considered adequate. The management team possesses a strong profile in terms of professional qualifications and experience. Furthermore, the bank has enjoyed a stable management team, as attested to by the over six years’ combined average tenure of the team in the company.

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 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.With respect to its own mortgage portfolio, on which it is the primary servicer, Imperial Homes displayed strong asset quality (in the loans and advances portfolio) in the three year period to F15, maintaining a non-performing loan (“NPL”) ratio of less than 3% throughout the period, and ending F15 with a NPL ratio of 1.3%, well below the peer average. Supported by strong underwriting standards and risk management processes, Imperial Homes’ frequency and quantum of write offs was very low. A modest N37m (0.1%) of average on-balance sheet gross loans were written off the advances book in F15 (nil in the immediate past four years.

The bank’s operations are supported by the ‘FinTrak’ banking application. The information technology (“IT”) platform is considered suitable for mortgage banking and servicing functions, considering its robustness and scalability data security capacity.

A sustained improvement in profitability and servicing experience would be positively considered. A negative rating action may follow a decline in financial performance, as well as evidence of weakness in the bank’s servicing capacity.

#Note that a servicer quality rating is classified as a non-credit rating (refer to published rating scales and definitions).


NATIONAL SCALE RATINGS HISTORY

Initial/last rating (not applicable)
Primary Servicer: (first time/new rating)                       
Outlook: (first time/new rating)                           
                           
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 Structure Finance Servicer Rating Criteria, updated February 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.


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 rating document.

The rating above was solicited by, or on behalf of, Imperial Homes Mortgage Bank Limited, and therefore, GCR has been compensated for the provision of the rating.

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 rating above was 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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