CariCRIS reaffirms ‘good creditworthiness’ ratings for Bourse Securities Limited

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PORT OF SPAIN, Trinidad — Caribbean Information and Credit Rating Services Limited (CariCRIS) has reaffirmed the Corporate Credit Ratings of CariA- (foreign and local currency) on the regional rating scale, and ttA- on the Trinidad and Tobago national scale of Bourse Securities Limited (BSL or the Company). These ratings indicate that the level of creditworthiness of this obligor, adjudged in relation to other obligors in Trinidad and Tobago and the wider Caribbean is good.

CariCRIS has also maintained a stable outlook on the ratings. The stable outlook is based on our expectation that over the next 12 to 15 months, BSL’s earnings metrics (ROA and ROE) will continue to remain favourable when compared to its regional peers. Additionally, the implementation of sound risk management, liquidity, and capital measures by BSL over the years is expected to insulate the Company from the large negative impact of the coronavirus pandemic (COVID-19) on markets and economies.

The ratings of BSL reflect the Company’s good financial performance underpinned by income diversity and improved efficiency levels in 2019. Asset quality also remained good and continues to be supported by a diverse investment portfolio. Also contributing to the credit ratings is the Company’s healthy risk-adjusted capitalisation level reflected in strong capital adequacy ratio and coverage of total assets.

Further, Bourse’s sound asset-liability management (ALM) practices contribute to an overall good liquidity profile while risk management practices continue to support strategic objectives. These supporting factors, however, are tempered by the fact that BSL’s funding base remains concentrated on a select number of institutional investors, which could subject the Company to potential refinancing risks, should these investors require repayment of the associated liabilities at short notice.

However, these potential refinancing risks have been addressed by the Company through the establishment of binding fixed-term liability maturities for such institutional investor to avoid bunching. In addition, the Company has in place a cap on aggregate maturities for any particular time period.

Rating Sensitivity Factors

Factors that could lead to an improvement in the ratings and/or Outlook include:

  • Improving business conditions over the next 12-15 months, resulting in ROA of above three percent and ROE of above eight percent;
  • Diversification of funding base towards more diverse and stable sources where less than 50 percent of funding is derived from BSL’s top ten clients over the next two years.

Factors that could lead to a lowering of the ratings and/or Outlook include:

  • A deterioration in the credit rating of the sovereign over the next 12-15 months leading to increased liquidity pressures;
  • Increasing liquidity pressure leading to funding withdrawals from its top three institutional investors.

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