Fitch Ratings said in a new report that Tunisian leasing companies’ performance will be reliant on economic recovery in 2016.
It believes that a challenging economic environment will continue to weigh on the Tunisian leasing sector in 2016. We expect GDP growth to remain weak at around 1.2% in 2016.
Domestic growth prospects over the medium-term will be dependent on social stability, security and the implementation of structural reforms improving the investment climate in Tunisia.
Some entities will seek diversification in sub-Saharan Africa although Fitch believes that it will expose them to higher credit and operational risks.
Fitch expects credit quality at leasing companies to continue to be resilient, with asset quality metrics remaining stable in 2016 in the absence of a strong economic recovery in Tunisia.
Leasing companies’ performance remains undermined by pressure on revenue due to muted lending, and still material loan impairment charges (LICs).
Fitch only expects profitability to show signs of improvement when there is renewed confidence in the operating environment. Cost of funding will slightly benefit from the 3Q15 decrease in the Tunisian monetary policy rate.
Fitch regards the funding profile as weak for all leasing companies given their high reliance on wholesale funding and potential exposures to liquidity shortages in the Tunisian financial market.
All companies are exposed to refinancing risk given their reliance on short-term debt and tight liquidity buffers. Fitch views access to funding through a bank shareholder as a strength.
Capital ratios are only acceptable for a majority of the leasing companies when considering their net exposures to credit risk, substantial debtor concentration and overall vulnerable credit quality.