Richard Pieris Finance receives Fitch’s ‘Bbb+(lka)’ rating; outlook Stable

Fitch Ratings has affirmed Richard Pieris Finance Limited’s (RPF) National Long-term Rating of ‘Bbb+(lka)’. The Outlook is Stable.

The affirmation reflects Fitch’s view that extraordinary support would be forthcoming from the parent, Richard Pieris & Company PLC (RICH, A(lka)/stable), if needed. Fitch’s expectation stems from the parent’s 98 percent effective control of RPF and their common brand name.

RPF is rated two notches below its parent because of its limited contribution to the group’s core businesses. Fitch sees limited synergies between RPF and the group, which is evident in the smaller share of lending within the group’s ecosystem. Furthermore, RPF’S integration with the group is low, as the subsidiary exercises considerable management and operational independence. In addition, we believe support from the parent could be constrained by RPF’S large size, as its assets represented 118 percent of group equity and 29 percent of group assets at end-march 2019. RPF’S intrinsic financial strength is weaker than its support-driven rating due to its small franchise, limited operating history, high-risk appetite and weak financial profile - primarily due to weak asset quality and high leverage.

Fitch believes RPF is likely to require additional capital in the medium term, which Fitch believes may be sourced from internal group resources or externally, to meet the total capital ratio requirement of 12.5 percent by July 2021 in light of its loan-growth targets. However, its regulatory capital ratios are currently above the minimum required.