International rating agency Fitch Ratings has changed the support rating assigned to Arab Tunisian Lease (ATL) to '5' from '4'. ATL, Tunisia's fourth largest leasing company with a 13.8 percent market share.
ATL is 22.5 percent controlled by Arab Tunisian Bank—itself wholly-owned by the Arab Bank group—10 percent by state-owned Banque Nationale Agricole, Tunisia's second largest commercial bank, and 4.75 percent by CARTE, a local private insurance company.
Were ATL to run into difficulties, Fitch continues to believe that support from its shareholders remains possible. However, given the absence of a clear majority institutional shareholder and Fitch's more onerous requirements for assigning Support ratings, provision of such support is now considered likely rather than certain, thus prompting the rating change.
ATL's long- and short-term national ratings of 'A(tun)' and 'F1(tun)', assigned by Maghreb Rating, Fitch's Tunisian affiliate, remain on Rating Watch Negative given the deteriorating operating environment for leasing companies in Tunisia. A review of the sector will be completed shortly, following which definitive rating action will be taken.
ATL's loan portfolio remained fairly flat in 02 given that demand for leasing finance contracted sharply. While bottom line results declined, reflecting weak growth, narrowing margins and higher provision requirements, ATL's performance indicators remained slightly above the peer group average, held up by wider margins.
This reflects a focus on small ticket business and a specialization in profitable medium-sized vehicle finance (trucks, vans), which represented some 35 percent of total loans at end-02. While asset quality throughout the sector remains poor, ATL's imapired loans ratio at end-02 of 15.1 percent was better than the peer average of 23 percent, reflecting lower exposure to the troubled tourism, agriculture and real estate sectors.
In addition, some 50 percent of loan proposals are introduced by ATL's two largest shareholders, which assist in the credit verification process. Loan loss cover, at 38.4 percent, remains low, which is typical throughout Tunisia. In Maghreb Rating's opinion, the financial system is, in real terms, under-reserved. However, ATL's management considers coverage ample given historically high recovery levels.
The local market for raising medium-term bonds, ATL's major source of funding, has become extremely tight. Short-term, revolving, lines provided largely by foreign banks provide some comfort and ATL plans to access long-term funds made available by EIB to Tunisia's leasing sector.
Liquidity ratios remain very tight throughout the sector and capital ratios, while exceeding prudential requirements, must be viewed in the light of asset quality risks. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
