Announcements Financial Institutions Fund Rating Alerts

GCR affirms Capital Trust’s National Scale Management Quality Rating of BBB(NG)(mq); Outlook Stable

Lagos, 05 September 2019—Global Credit Ratings has affirmed the public national scale management quality* rating of BBB(NG)(mq) accorded to Capital Trust Investment & Asset Management Limited (“Capital Trust” or “the company”); with the outlook accorded as Stable. The rating is valid until May 2020.

SUMMARY RATING RATIONALE

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

The management quality (“mq”) rating accorded to Capital Trust reflects GCR’s assessment of its corporate profile, financial sustainability, portfolio management skill and experience, and sufficiency of risk management, controls and systems.

Corporate profile: Capital Trust is a niche player in the Nigerian financial services space with a track record of over a decade and specialises in the provision of asset management and advisory services (primarily focusing on high networth individuals). Capital Trust’s operational archetypical is such that only core asset management functions and research are performed in-house, while trading mandates are executed through a third party (hence requiring few staff complements). Overall, the profile of the management team is considered potent.

Financial sustainability: Profitability metrics dipped slightly in FY18 due to elevated overhead cost. Capital Trust achieved a 34.4% growth in total operating income to N78.3m during the year, fuelled largely by advisory and fund management related income. Other income declined notably 98.4% to N0.1m, as the income stream was mainly supported by one-off items in the previous year. However, operating expenditure rose by 130.9% to N34.4m, translating to an elevated cost ratio of 44.5% (FY17: 25.1%), consequently eroding pre-tax profit to 98.9% of the FY17 level. Total shareholders’ funds stood at N398.4m at FY18, representing a notable 10.3% growth. Capital Trust’s capitalisation is considered strong relative to the minimum regulatory requirement in the country.

Portfolio management: Capital Trust’s portfolio management process is considered satisfactory. In line with general practice, responsibilities for portfolio and investment management are vested in a constituted board committee, which meets quarterly to review the investment strategy, asset allocation, holdings and transactions in all funds and portfolios, as well as review and approve new products and major investment strategy adjustments, while providing oversight with respect to process and procedures relevant to the portfolio management function. Portfolio construction is in accordance with investment policy guidelines, and benchmarks are set per assets. Capital Trust has sustained a consistent growth in AUM in the two years to FY18. On the back of over 30x growth in FY17 following the successful launch of Africa Infra Plus Fund (“AIPF”), the company registered a notable 169.7% growth in AUM to N20.8bn in FY18, underpinned by a rapid growth in AIPF and the launch of a new product during the year.

Risk management: The available risk management mechanism appears adequate based on the nature of the company’s operations.

Improvement in the competitive position, as well as establishing and maintaining a satisfactory fund performance track record and stable financial performance. A negative rating action may arise from loss of market share/key clients, and deterioration in financial performance metrics.

*Note that management quality ratings are classified as non-credit ratings (refer to published rating scales and definitions).

NATIONAL SCALE RATINGS HISTORY

Initial rating (March 2017)
Management Quality rating: BBB(NG)(mq)
Rating outlook: Stable

Last rating (April 2018)
Management Quality rating: BBB(NG)(mq)
Rating outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Julius Adekeye
Senior Credit Analyst
adekeye@globalratings.net
+234 1 904 9462-3

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
Capital Trust Rating reports (2017-18)

RATING LIMITATIONS AND DISCLAIMERS

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/RATINGS-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 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 credit rating document.

The rating was solicited by, or on behalf of, Capital Trust Investment & Asset Management Limited, and therefore, GCR has been compensated for the provision of the rating.

Capital Trust Investment & Asset Management 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 Capital Trust Investment & Asset Management Limited with no contestation of/changes to the rating.

The information received from Capital Trust Investment & Asset Management Limited and other reliable third parties to accord the rating included the audited annual financial statements of Capital Trust Investment & Asset Management Limited for five years, up to 31 December 2018. In addition, other information specific to the rated entity and/or industry was also received.

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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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