Announcements Financial Institutions Rating Alerts

GCR Affirms WSTC Financial Services Limited’s Rating Of BBB-(NG); Outlook Stable.

Lagos Nigeria, 6 September 2018–Global Credit Ratings has affirmed the national scale ratings assigned to WSTC Financial Services Limited of BBB-(NG) and A3(NG) in the long term and short term respectively; with the outlook accorded as Stable. These ratings are valid until July 2019.

SUMMARY RATING RATIONALE

Global Credit Ratings has accorded the above credit ratings to WSTC Financial Services Limited (“WSTC” or “the company”) based on the following key criteria:

WSTC displayed improved financial performance metrics and good quality of assets during FY17. Also, cognisance is taken of the company’s ability to leverage the acceptability and popularity of its brand in the financial services industry, underpinned by its relatively long track record of over two and half decades.

The company maintained a strong capitalisation position for its operational scale throughout the review period. Shareholders’ funds grew 10.5% to N1.8bn at FY17, which translated to a capital adequacy ratio of 102.9% against the required minimum of 12.5% for the subsector and this remained strong at 78.0% as at May 2018.

Asset quality is considered sound as WSTC sustained nil non-performing loans (“NPLs”) for the second consecutive period in FY17.

Liquidity risk is considered minimal, given the balance sheet structure which comprised 69.1% in cash and liquid assets. While, cognisance is taken of the liquidity gap of N2.6bn (FY16: N2.1bn) in the less than one month maturity bucket of asset and liabilities (based on contractual maturity matching), behaviourally, most of the borrowings are usually rolled over at maturity.

Key performance metrics improved in FY17, as pre-tax profit closed the year at N275.3m, which represented 6.4% increase from the previous year, and well ahead of the budgeted N107.9m. While net interest income grew 49.9% in FY17, non-interest income declined by 39.2% due to moderation in FX gains (from N222.9m in FY16 to N107.1m in FY17). Impairment charge amounted to N1.3m (FY16: nil) during the period, but performance was further supported by a 12.2% reduction in operating expense, which saw the cost to income ratio to a lower 56.2% (FY16: 61.0%). Consequently, return on average equity and assets (“ROaE” and “ROaA”) improved to 14.2% and 4.6% in FY17, from 13.7% and 4.5% respectively in FY16.

Performance at 1H FY18 reflects an improvement in pre-tax profit when compared to the previous year and considered in line with budget for the period. Management remained optimistic about achieving the set budget for the full year.

An upward review of the rating may follow sustained improvement in profitability, and liquidity. Also, the company’s ability to maintain asset quality metrics at sound level may be positively considered. However, a significant decline in asset quality and /or liquidity position, due to expansion risk asset may result in a downward review of the rating.

NATIONAL SCALE RATINGS HISTORY

Initial rating (June 2011)
Long term: BBB-(NG); Short term: A3(NG)
Outlook: Stable

Last rating (August 2017)
Long term: BBB-(NG); Short term: A3(NG)
Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Funmilayo Abdulrahman
Senior Credit Analyst
funmilayo@globalratings.net
+234 1 462 2545, 904 9462-3

Committee Chairperson
Dave King
king@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Criteria for Rating Banks and Other Financial Institutions, updated March 2017
Criteria for Rating Finance and Leasing Companies, updated March 2017
WSTC rating reports (2011-17)
Glossary of Terms/Ratios (February 2016)

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 a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

The ratings were solicited by, or on behalf of, WSTC Financial Services Limited, and therefore, GCR has been compensated for the provision of the ratings.

WSTC Financial Services 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 WSTC Financial Services Limited with no contestation of/changes to the ratings.

The information received from WSTC Financial Services Limited and other reliable third parties to accord the credit ratings included the latest audited annual financial statements at 31 December 2017 (plus four years of comparative numbers), latest internal and/or external auditor’s report to management, full year detailed budget for 2018, and most recent management accounts to 30 June 2018. In addition, information specific to the rated entity and/or industry was also received.

image_pdfPDF View


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.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright 2019 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.