Fitch Ratings has withdrawn its Support ratings for six Tunisian leasing companies and Tunisie Factoring (TF), following a change in policy. Under the new policy, financial institutions, which are not banks and which have not been assigned a Long-term foreign or local currency rating are not assigned a Support rating.
The leasing companies affected are Amen Lease, Arab Tunisian Lease, Compagnie International de Leasing, General Leasing, Tunisie Leasing and Union Tunisienne de Leasing.
TF's Support rating of 5 has also been withdrawn.
At the same time, Maghreb Rating (MR), a subsidiary of Fitch, has changed the Outlook on ATL's and TL's National ratings to Stable from Negative and affirmed the ratings at BBB+. Meanwhile, the agency has affirmed the National ratings for AL at BBB-, for CIL at BBB, and for GL at BBB, with Negative Outlook. It has affirmed UTL's and TF's National ratings at A and BBB respectively with Stable Outlook.
Of the six MR-rated leasing companies, ATL and TL have weathered best the sector's problems and uncertainties arising from the slower economic growth in 2003. Both companies have lower bad debts and a smaller level of residual risk in their assets than the other rated leasing companies. At end-2003, net classified leases represented large but manageable proportions of equity in the two companies. For 2003, they also managed to maintain stronger capital, better profitability, and saw only a slight narrowing in the average interest spreads they charged customers.
Combined with tighter lending controls, a sharper focus on leasing more liquid assets and better economic growth prospects, MR no longer expects to see material deterioration in these companies. As a result, it has changed the Outlook to Stable from Negative.
The Negative Outlook on AL, CIL and GL reflects the less convincing financial position of these companies. Although all three companies have to varying degrees introduced measures to improve initial credit assessment of clients and recovery procedures for bad debtors, they are starting from a weaker position. At end-2003, net classified leases represented substantial proportions of equity in the three companies, and MR considers that further loan loss provisions will be required to reduce the risk to a more acceptable level.
At the same time, all three companies suffered from a significant narrowing of average interest spreads, leading to a notable reduction in net interest revenue. Having reported a small operating loss in 2003, AL looks more vulnerable than CIL or GL. Thus risks, revenues and capital look worse for these companies and, regardless of any improvement in their operating environment, MR considers that further deterioration is more likely to occur than not.
The National rating of UTL is based on potential support from its majority shareholder, Union Bancaire pour le Commerce et l'Industrie which is, in turn, 50.8 percent-owned by the French bank, BNP Paribas, by means of a holding company. This support is shown in the close integration of UTL's management and controls in UBCI, and UTL is already developing its business in conjunction with UBCI, with the goal of reducing costs and improving credit risk. Without this support, the ratings assigned to UTL would have been lower, reflecting weak profitability and asset quality.
MR's affirmation of TF's National rating with Stable Outlook reflects its ability to weather adverse economic conditions, effective operational procedures, conservative risk management, and good market knowledge. At end-2003, the company reported some loan concentration, but its credit risk remained good, with just four percent of loans being classified as doubtful, and those were adequately covered by loan loss reserves. Profits fell in 2003 as a result of weaker economic growth, but the company strengthened its still small capital base. — (menareport.com)
© 2004 Mena Report (www.menareport.com)
