Stanbic IBTC Asset Management Gets Topnotch Ratings Upgrade
GCR Ratings has upgraded Stanbic IBTC Asset Management Limited’s national scale long term issuer rating to AA+(NG) from AA(NG) in alignment with the group’s risk score, according to a rating note.
In the new report, the emerging market focused rating firm said the short-term issuer rating was also affirmed as A1+ (NG), with a stable outlook. According to GCR, the rating upgrade accorded is an alignment of Stanbic IBTC Asset Management Limited’s ratings with that of the group, in line with GCR’s rating criteria.
Stanbic IBTC Asset Management Limited, a non-core operating entity within the Stanbic IBTC Holding PLC’s group, holds an asset that is less than 10% of the group, it said.
Therefore its rating was capped by that of the core operating entity in the group, Stanbic IBTC Bank PLC.
The asset management firm ratings, according to GCR, reflects its strong competitive position, adequate capital and moderate risk level. Cash generation is robust, and liquidity adequate for the current operational scale, the rating note stated.
The upgrade was also helped by the manager’s competitive positioning that is underpinned by its leadership position in the asset management space, particularly with respect to the collective investment schemes (CIS).
Total asset under management accounted for over 40% of total publicly quoted CIS as of December 2021, GCR Ratings said in the report.
To strengthen its market position, Stanbic IBTC Asset Management commenced the offering of alternative investments products in financial year 2021.
The company launched its first infrastructure fund of about N6.9 billion in asset under management (AUM) and its appointment to manage a real estate investment trust scheme, UPDC REIT of up to N30 billion in AUM).
GCR said going forward, Stanbic IBTC Asset Management is expected to maintain a leadership position in CIS, albeit the alternative investments schemes are expected to grow rapidly over the short to medium term across the industry, which may bring about increased competition in the sector.
It said management has also indicated ongoing plans to raise additional issuances under its infrastructure fund throughout the financial year 2022. Read: WSTC Hits Stanbic IBTC with Sell Rating Despite Positive Numbers
The rating note revealed that the asset management company maintains a sizeable capital level alongside a non-leveraged balance sheet, with no major counterparty risks which are positively considered in support of the rating.
2The manager consistently continues to demonstrate a very strong cash-generating capacity underpinned by the size of its portfolio. Based on our forecast, we expect Stanbic IBTC Asset Management’s financial capacity to remain sound over the next 12-18 months2.
Earning is sound and relatively stable over the review period, according to the rating note. Its gross revenue and earnings before interest tax depreciation and amortisation (EBITDA) margin maintained an upward trajectory over the five years of review, equating to an average of 58% at 2021.
Revenue is largely driven by the volume of AUM and the accruing management fee income.
“We expect earnings to remain strong over the next 12 to 18 months given the high retail-focused nature of the CIS which dominates the product lines”. For the rating, GCR considered liquidity adequate for the current operational scale and assigned a neutral score.
“While the manager has maintained a sizeable operational cash inflow and short-term liquid assets, coverage of uses versus sources of funds remain volatile over the review period, mainly due to high dividend pay-outs.
“Nevertheless, we expect management to maintain sufficient liquidity to support operations going forward. As a member of Stanbic IBTC Holdings PLC, strong support is available to Stanbic IBTC Asset Management Limited from the group”, GCR added.
However, it said the manager’s standalone risk score is considered strong, and somewhat constrained by the creditworthiness of the wider group.
Also, GCR said the stable outlook reflects our expectation that Stanbic IBTC Asset Management on a standalone will remain a key player in the industry, with sound balance sheet metrics, strong earnings, and minimal risk exposures over the next 12-18 months. #Stanbic IBTC Asset Management Gets Topnotch Ratings Upgrade
