RATING DRIVERS
Supporting Factors:
- Consistent growth in the Company’s asset base, underpinned by a relatively diversified investment portfolio
- Adequate liquidity and capitalization levels and generally favorable cost of funds
- Healthy financial performance supported by robust growth in income and profitability
- Adequate risk management and governance structure guided by continuously updated policies with oversight by the Board of Directors
Constraining Factor:
- Exposure to financial risks arising from economic conditions in the OECS
CariCRIS’ Rating Sensitivity Factors:
Factors that could individually, or collectively, lead to an improvement in the ratings and/or outlook include:
- Rising profit margins and sustained earnings growth for ECHMB over the next 3 years
- Further diversity in income streams through the successful launch of new products and services
- Further diversity in its funding to include sources from outside the OECS region
- Strengthening of its capitalization level to above 20%
Factors that could individually, or collectively, lead to a lowering of the ratings and/ or outlook include:
- A significant tightening of the net interest spread below 1% earned on investments and a material decline in profitability of 10%
- Lowering of the Company’s Tangible Net Worth to Total Assets to below 12%
COMPANY BACKGROUND
Eastern Caribbean Home Mortgage Bank (ECHMB or the Company) was created pursuant to the ECHMB Agreement Act (1995) and commenced operations on April 22, 1996. It is a privately managed corporation, and the current 65 shareholders are all financial institutions from the Organisation of Eastern Caribbean States (OECS) as well as from the wider Caribbean. These financial institutions include the Eastern Caribbean Central Bank (ECCB), commercial banks, social security agencies, insurance companies, mortgage companies, building and loan associations and credit unions. The largest single shareholder is the ECCB, which currently holds 24.9% of ECHMB’s total shareholding.
ECHMB was established with the primary objective of developing the secondary mortgage market within 8 participating member countries of the OECS, namely Anguilla, Antigua & Barbuda, The Commonwealth of Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia and St. Vincent and the Grenadines. The main activity of the Company has traditionally been the purchase and sale of mortgages to develop and maintain a secondary market for residential mortgages in the member territories. In FY2016[1], following years of deteriorating mortgage market conditions, ECHMB expanded its mandate to become more relevant to the changing external environment. Given its considerably increased cash and investment portfolio in relation to its mortgage assets, the Company, placed more emphasis on the investment side of the business by broadening the range of financial assets in which it can invest and simultaneously widening the permissible jurisdictions for its investments to include the wider Caribbean region and the United States. In FY2019, ECHMB launched its repurchase agreement programme, towards increasing its investment product offerings and diversifying its funding base.
[1] Financial Year refers to April 1 to March 31.
Analytical Contacts:
Keith Hamlet
Tel: 1-868-627-8879 Ext. 244
E-mail: [email protected]
Kathryn Budhooram
Tel: 1-868-627-8879 Ext. 227
E-mail: [email protected]
Website: www.caricris.com
Email: [email protected]
Disclaimer: CariCRIS has taken due care and caution in compilation of data for this product. Information has been obtained by CariCRIS from sources which it considers reliable. However, CariCRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. No part of this report may be published / reproduced in any form without CariCRIS’ prior written approval. CariCRIS is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this product.