RAM Ratings reaffirms BBB-/P3 ratings of Bartleet Finance Ltd

RAM Ratings has reaffirmed Bartleet Finance Limited’s (BFL) long and short-term financial institution ratings at BBB- and P3, respectively and said the long-term rating has a stable outlook.

BFL is a small player that accounted for only 1.84% of the registered finance companies’ industry asset base as at FYE 31 March 2007.

Even though the company has six branches outside Colombo, the deteriorating macro-economic environment and competition from banks have impinged on its loan growth, RAM said in a statement.

Despite the deceleration in the growth momentum of its loan base, BFL’s asset quality has improved, albeit with the possibility of weakening in the future.

The company has banked on the booming hire-purchase (HP) segment in Sri Lanka, which accounts for almost 80% of its lending portfolio. As BFL commenced HP vehicle financing only in 2005, this segment is relatively new. As such, RAM Ratings considers this category of assets to be unseasoned, as evident from the marginal increase in delinquencies. “The company’s decelerating asset growth and better collections, have reduced its bank borrowings. Nonetheless, the rising interest rate environment has shifted BFL’s deposit mix towards the shorter end, thus broadening the negative funding gaps in the “less than 1 year” bracket. Against this backdrop, the continued absence of a formal asset-liability management process can become a concern,” the statement said.

At the same time, the company’s profit performance was dampened by larger than average overheads and loan-loss provisions.
BFL closed its books for the FY Mar 2007 with a pre-tax profit of Rs 64.46 million against Rs 103.68 million in the earlier year). Looking ahead, RAM Ratings expects the company’s financials to weaken further owing to its contracting margins.