Announcements Financial Institutions Fund

GCR Accords STL Trustees Limited A Rating of A(NG)(mq); Outlook Stable

Lagos Nigeria, 14 August 2019 – Global Credit Ratings has accorded a manager quality rating of A(NG)(mq) to STL Trustees Limited; with the outlook accorded as Stable. The rating are valid until June 2020.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating to STL Trustees Limited (“STL” or “the company”) based on the following key criteria:

The management quality rating accorded to STL reflects its strong competitive position in fund/portfolio management and trusteeship, with a track record of over two decades and a stable management team. Cognisance is taken of the wealth of experience of the senior management team in the financial market space, with average professional experience estimated at around 25 years. Staffing level is also deemed satisfactory for the current operational scale.

STL’s investment management is thorough, with investment selection & monitoring, and portfolio management vested on the board and management investment committee. The general investment policy spells out exposure limits per asset class, as well as restrictions. However, cognisnace is taken of the fact that investment of assets under STL are largely guided by the respective trust deed of the managed fund. Total clients’ funds (“CF”) stood at N23.9bn at FY18, from N30.8bn the previous year, representing a 22.5% YoY decline, which is underpinned by fund liquidation (mainly maturity of the related bonds).

STL’s capital base has recorded consistent growth over the years, peaked at N10.8bn at FY18 (FY17: N9.4bn), representing a four-year compound annual growth rate (“CAGR”) of 32.6%, with growth supported by strong internal capital generation. However, given the decline in CF pre-tax profit ended down at N2bn in FY18, representing a 28.2% YoY decline. Consequently, return on average equity and asset stood at 19.2% and 5%, down from 33.3% and 5.2% respectively in FY17.

The risk management structure is considered adequate for the current level of operation. Responsibility for risk management is hierarchically tiered among the board and management, with the former at the zenith.

An 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, loss of 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 rating (June 2017)
Management Quality rating: A(NG)(mq)
Rating outlook: Stable

Last rating (July 2018)
Management Quality rating: A(NG)(mq)
Rating outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Adeyinka Olowofela
Credit Analyst
yinka@globalratings.net

Committee Chairperson
Dave King
King@globalratings.net

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

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; 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 was solicited by, or on behalf of, STL Trustees Limited, and therefore, GCR has been compensated for the provision of the rating.

STL Trustees Limited participated in the rating process via face-to-face management meetings and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The rating above was disclosed to STL Trustees Limited with no contestation of/changes to the rating.

The information received from STL Trustees Limited and other reliable third parties to accord the rating included the audited annual financial statements of STL Trustees Limited for the year ended 31 December 2018. In addition, other 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.

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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://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. 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 THIS SITE.

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