Businesses & Financial News

SA agency upgrades Police Sacco credit rating to A-

South African rating agency Global Credit Ratings (GCR) has upgraded the rating of Kenya National Police DT Sacco, citing good asset quality, healthy funding and liquidity.

The agency said in a notice that it has raised the Sacco’s long and short term issuer ratings to “A-/A2 from “BBB+” previously and assigned it a positive outlook.

This is an improvement from “BBB+/A2” it was assigned in June last year and “BBB/A3” the year before.

“The ratings on Kenya National Police Deposit Taking SACCO Society Limited reflect its robust capitalization, sound funding and liquidity, and favorable asset quality relative to financial sector peers, counterbalanced by its limited competitive position in the context of the broader banking and financial institutions sector,” reads the notice released on Friday, noting that the Sacco’s strong capital position was a key ratings strength.

GCR said it expects the firm’s strong capital position to carry on into the long term, supported by a stable growth in earnings and a sustainable dividend pay-out ratio at 17 percent per share capital.

The society’s dividend policy dictates that the dividends declared and approved by the board are the net surplus after retention of Sh 1billion or 20 percent of the net earnings and fulfilment of the capital adequacy requirements.

While assigning it the new rating, GCR noted that the current core capital to total assets ratio at 31 percent by the firm, was well above the regulatory requirement of 10.0 percent, and that the institutional capital to assets ratio at 24 percent is higher than the 8.0 percent regulatory requirement and the core capital to deposits ratio at 59 percent is above the 8.0 percent requirement.

“Given the business model of SACCOs, Kenya National Police DT SACCO’s cost of funding is materially higher at 10.2 percent in FY21 (FY20: 9.7 percent) compared to commercial banks which average c.3.5 percent,” it noted.

The Kenya National Police DT SACCO is ranked the third largest deposit-taking co-operative society with over 65,000 members and assets of Sh 44 billion.

While reacting to the firm’s latest credit rating, the Sacco’s Chairman David Mategwa expressed optimism that the firm will hit 50 Billion in assets by year end as it marks its Golden Jubilee celebrations in June this year.

“This has been possible through the ongoing education and financial training of our members, good governance and the adoption of technology,” said Mategwa.

The firm’s assets grew from Sh39.1 billion in 2020 to Sh44 billion last year, representing an increase of Sh12.7 per cent, with deposits also jumping by 10.3 per cent from Sh21. 3 billion in 2020 to Sh23. 5 billion in 2021.

Source: People Daily

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