Capricorn affirmed AA rating
Global Credit Ratings is of the opinion that Capricorn Investment Holdings is a quality company.
STAFF REPORTER
Global Credit Ratings has affirmed Capricorn Investment Holdings a AA ratings on its scale, saying its comfortable liquidity position, risk capitalisation and strong domestic market share boded well for the localised lender.
The good credit score was further bolstered by the acquisition of equity by the Government Institutions Pension Fund, the largest institutional investor in Namibia, GCR said.
“The ratings also reflect Capricorn Group’s risk-appropriate capitalisation, comfortable liquidity, resilient earnings performance, as well as further earnings and geographic diversity from recent acquisitions of banking operations in Zambia and Botswana, contributing a combined 17.9% to group consolidated assets following the release of its 2017 financial year end results and 3.8% of pre-tax profits,” GCR said in its ratings review.
While Capricorn was expected to remain resilient, the prevailing economic challenges and an uncertain global economic outlook would continue to put pressure on its earnings and asset quality metrics, GCR felt.
“The South African national scale rating may also be influenced by the relative sovereign ratings of South Africa and Namibia and the Group’s credit quality relative to the South African peer universe,” GCR said.
Further underpinning the ratings, GCR said, was the potential support from the Group’s largest shareholders, Capricorn Investment Holdings Limited (CIH), with a 40.7% stake, and Government Institutions Pension Fund (GIPF), with 26% shareholding.
The GIPF acquired 25% of the Group’s shares in May 2017. The GIPF, together with CIH, became shareholders of reference for the Group. GIPF showed its commitment as Capricorn Group’s reference shareholder by extending long term senior debt funding of N$1.3 billion to the Group.
Likewise, CIH also committed to provide 10-year debt funding amounting to N$900 million. The funding lines enabled the Group to make available committed contingent funding facilities of approximately N$1 billion to its three operating banks, significantly mitigating liquidity risk within the Group.
“GCR believes that timely financial support would be provided by GIPF and CIH in their role as reference shareholders, or ultimately by the Bank of Namibia due to Bank Windhoek’s status as a systemically important financial intuition,” it said.
The Group’s leading operating subsidiary, BW, is the largest locally owned bank and second largest commercial bank in Namibia. BW contributed a lower 80.1% of the Group’s consolidated assets at and a marginally higher 87.0% of pre-tax profit following recent acquisitions.
Other non-banking subsidiaries which offer asset management, unit trust management products and services, property development and long and short term insurance, contributed 2% of consolidated assets and 10.6% of pre-tax at FY17. While the Group’s ratings have largely replicated BW’s ratings, GCR has taken cognisance of added diversification benefits from recent acquisitions at Group level.
Pre-tax profit grew by a modest 0.3% in the financial year 2017 on the back of a challenging economic climate. Key profitability indicators remained sound with the Group reporting a return on equity and a return on assets of 19.5% and 2.4% respectively.
“Strong liquidity and loss-absorption buffers and steady financial metrics throughout the economic cycle, as well as further enhancement of geographic and earnings diversification benefits, would be positively considered. A sharp deterioration in the capital position, liquidity, earnings and asset quality, could see the ratings come under pressure,” GCR said.
Global Credit Ratings has affirmed Capricorn Investment Holdings a AA ratings on its scale, saying its comfortable liquidity position, risk capitalisation and strong domestic market share boded well for the localised lender.
The good credit score was further bolstered by the acquisition of equity by the Government Institutions Pension Fund, the largest institutional investor in Namibia, GCR said.
“The ratings also reflect Capricorn Group’s risk-appropriate capitalisation, comfortable liquidity, resilient earnings performance, as well as further earnings and geographic diversity from recent acquisitions of banking operations in Zambia and Botswana, contributing a combined 17.9% to group consolidated assets following the release of its 2017 financial year end results and 3.8% of pre-tax profits,” GCR said in its ratings review.
While Capricorn was expected to remain resilient, the prevailing economic challenges and an uncertain global economic outlook would continue to put pressure on its earnings and asset quality metrics, GCR felt.
“The South African national scale rating may also be influenced by the relative sovereign ratings of South Africa and Namibia and the Group’s credit quality relative to the South African peer universe,” GCR said.
Further underpinning the ratings, GCR said, was the potential support from the Group’s largest shareholders, Capricorn Investment Holdings Limited (CIH), with a 40.7% stake, and Government Institutions Pension Fund (GIPF), with 26% shareholding.
The GIPF acquired 25% of the Group’s shares in May 2017. The GIPF, together with CIH, became shareholders of reference for the Group. GIPF showed its commitment as Capricorn Group’s reference shareholder by extending long term senior debt funding of N$1.3 billion to the Group.
Likewise, CIH also committed to provide 10-year debt funding amounting to N$900 million. The funding lines enabled the Group to make available committed contingent funding facilities of approximately N$1 billion to its three operating banks, significantly mitigating liquidity risk within the Group.
“GCR believes that timely financial support would be provided by GIPF and CIH in their role as reference shareholders, or ultimately by the Bank of Namibia due to Bank Windhoek’s status as a systemically important financial intuition,” it said.
The Group’s leading operating subsidiary, BW, is the largest locally owned bank and second largest commercial bank in Namibia. BW contributed a lower 80.1% of the Group’s consolidated assets at and a marginally higher 87.0% of pre-tax profit following recent acquisitions.
Other non-banking subsidiaries which offer asset management, unit trust management products and services, property development and long and short term insurance, contributed 2% of consolidated assets and 10.6% of pre-tax at FY17. While the Group’s ratings have largely replicated BW’s ratings, GCR has taken cognisance of added diversification benefits from recent acquisitions at Group level.
Pre-tax profit grew by a modest 0.3% in the financial year 2017 on the back of a challenging economic climate. Key profitability indicators remained sound with the Group reporting a return on equity and a return on assets of 19.5% and 2.4% respectively.
“Strong liquidity and loss-absorption buffers and steady financial metrics throughout the economic cycle, as well as further enhancement of geographic and earnings diversification benefits, would be positively considered. A sharp deterioration in the capital position, liquidity, earnings and asset quality, could see the ratings come under pressure,” GCR said.
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