RAM assigns Vallibel Finance ‘BB+’ / stable initial rating
View(s):“Aggressive” loan growth and increases in new non-performing loans have resulted in RAM assigning an initial financial institution rating for Vallibel Finance of “BB+”, for the long-term, with stable outlook, and “NP”, for the short-term. Vallibel Finance is 72.87 per cent owned by Dhammika Perera’s Vallibel Investments. It provides leasing and hire-purchase facilities out of the six branches and four collection centres it operates.
Further, the company has a credit assets portfolio which has grown to 1.83 per cent of industry assets as at end-March 2012, from 0.63 per cent as at end-March 2008.
According to RAM’s recent ratings announcement; “Vallibel’s ratings are moderated by the increasing trend in new non-performing loans (‘NPLs’) in recent times, coupled with its unseasoned loan portfolio, given aggressive loan growth. The ratings are, however, upheld by the company’s average asset quality, performance and capitalisation levels”.
Additionally, RAM also indicated that “Vallibel’s asset quality is viewed as average. While the company’s loan assets have expanded aggressively at a compound annual growth rate of 68.16 per cent over the past five years, it has seen a significant increase in new NPLs in recent times; its gross NPL ratio, however, is in line with that of similarly-rated peers”.
Also noted; “Overall, Vallibel’s performance is deemed average; its profitability indicators were relatively stable and in line with similar-rated peers’. The company’s net interest margin (‘NIM’) clocked in at 10.85 per cent in FY Mar 2012 (FY Mar 2011: 11.46 per cent), although narrowing to 9.26 per cent in 1H FY Mar 2013 as deposits re-priced upward faster in a rising interest-rate environment”. (JH)
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