Fitch Ratings Lanka has assigned Alliance Finance Company PLC (AFC) a National Long-Term Rating of 'BB+(lka)' with a stable outlook.
The agency has also assigned the company's outstanding senior unsecured debentures a National Long-Term Rating of 'BB+(lka)' and its outstanding subordinated debentures a National Long-Term Rating of 'BB(lka)'.
AFC's rating reflects its modest franchise, weak asset quality, lower capitalisation and higher risk appetite relative to peers.
The rating also captures strengthened management and controls stemming from an on-going organisational restructuring, which Fitch expects to help improve AFC's asset quality through better underwriting. Furthermore, the ratings take into account AFC's adequate profitability. AFC's exposure to three-wheeled vehicles remains high (37.2% of the total loan book at end-September 2016) and Fitch believes that this makes its portfolio more risky compared with that of its peers. The share of motor car financing increased to 19.4% at end-September 2016 from 16.5% at end-March 2015.
The company has also expanded into microfinancing (10% of the loan book at end-September 2016) after its gold loan book contracted to 4.3% at end-September 2016 from 15.6% at end-March 2014. The challenging operating environment and poor management of defaulted loans resulted in a sharp increase in non-performing loans (NPLs) from gold loans and three-wheeler leases in the financial year ended March 2014 (FY14) and FY15.
www.dailynews.lk
The agency has also assigned the company's outstanding senior unsecured debentures a National Long-Term Rating of 'BB+(lka)' and its outstanding subordinated debentures a National Long-Term Rating of 'BB(lka)'.
AFC's rating reflects its modest franchise, weak asset quality, lower capitalisation and higher risk appetite relative to peers.
The rating also captures strengthened management and controls stemming from an on-going organisational restructuring, which Fitch expects to help improve AFC's asset quality through better underwriting. Furthermore, the ratings take into account AFC's adequate profitability. AFC's exposure to three-wheeled vehicles remains high (37.2% of the total loan book at end-September 2016) and Fitch believes that this makes its portfolio more risky compared with that of its peers. The share of motor car financing increased to 19.4% at end-September 2016 from 16.5% at end-March 2015.
The company has also expanded into microfinancing (10% of the loan book at end-September 2016) after its gold loan book contracted to 4.3% at end-September 2016 from 15.6% at end-March 2014. The challenging operating environment and poor management of defaulted loans resulted in a sharp increase in non-performing loans (NPLs) from gold loans and three-wheeler leases in the financial year ended March 2014 (FY14) and FY15.
www.dailynews.lk
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