Lagos Nigeria, 22 July 2019 – Global Credit Ratings has accorded a manager quality rating of BBB(NG)(mq) to Sterling Asset Management and Trustees Limited; with the outlook accorded as Stable. The ratings are valid until May 2020.
Global Credit Ratings (“GCR”) has accorded the above credit ratings to Sterling Asset Management and Trustees Limited (“SAMTL”, “the company” or “the manager”) based on the following key criteria:
The management quality rating of SAMTL reflects its competitive position in fund/portfolio management and trusteeship, with a track record of over three decades (including its operations as a subsidiary of Sterling Bank Plc). Cognisance is taken of the wealth of experience of the management team in the financial market space, with average professional experience estimated at around 17 years. Staffing level is also deemed satisfactory for the current operational scale, with 52 staff strength as at end April 2019.
SAMTL’s capital base has recorded consistent growth over the years, registering at a peak of N6.0bn at FY18 (FY17: N5.1bn), representing a four-year compound annual growth rate of 14.7%. Growth has mainly been supported by strong internal generation. At this level, the Manager’s capital is about 40 times the regulatory minimum requirement of N150m for a portfolio manager in Nigeria. Profitability improved year-on-year, with the pre-tax profit closing at N956.7m in FY18, representing a 1.8% YoY growth. Consequently, return on average equity and asset (“ROaE” and “ROaA”) stood at 11.7% and 3.2% (FY17: 18.5% and 4.6%) respectively.
SAMTL has an investment policy which is approved by the board, with investment selection, monitoring and portfolio management vested on the board and management investment committee. The investment policy spells out exposure limits per asset class, regulatory requirements, restrictions and prohibitions. Total funds under management (“FUM”) stood at N12.7bn at FY18, from N13bn the previous year, representing a 2.8% YoY decline, which management attributed to market conditions (high interest rate).
The risk management structure is considered satisfactory for the current level of operation. The board of directors (“the board”) oversees the general audit and risk management through its risk management committee. The internal audit unit reports to head of risk, who in turn report directly to the board, on day-to-day risk monitoring and adherence to the control systems.
Upward movement in the rating may result from a significant and sustained improvement in asset attraction and retention capacity. Conversely, a downward movement in the rating may arise from a decline in market share/ key clients and significant decline in financial performance.
*Note that manager quality ratings are classified as non-credit ratings (refer to published rating scales and definitions).
NATIONAL SCALE RATINGS HISTORY
Initial/last rating (June 2019)
Long term rating: BBB(NG)(mq)
Rating outlook: Stable
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Criteria for Rating Funds and Asset Managers, updated March 2017
Glossary of Terms/Ratios (February 2016)
RATING LIMITATIONS AND DISCLAIMERS
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, Sterling Asset Management and Trustees Limited, and therefore, GCR has been compensated for the provision of the ratings.
Sterling Asset Management and Trustees 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 Sterling Asset Management and Trustees Limited with no contestation of/changes to the ratings.
The information received from Sterling Asset Management and Trustees Limited and other reliable third parties to accord the rating included the audited annual financial statements of Sterling Asset Management and Trustees Limited for the year ended 31 December 2018. In addition, other information specific to the rated entity and/or industry was also received.