RATING DRIVERS
Supporting Factors
- Good financial performance despite a challenging operating environment
- Strong capitalization, well above that of its peers
- Good liquidity supported by a diversified funding base
- Prudent risk management strategies
Constraining Factors
- Credit loan portfolio quality adversely impacted by the COVID-19 pandemic
- Prevailing economic conditions could negatively impact financial performance
Rating Sensitivity Factors
Factors that could, individually, or collectively lead to an improvement in the ratings and/or outlook include:
- An improvement in the credit rating of the sovereign over the next 12-15 months
- Improvement in the Bank’s interest spread to > 3%, sustained over a 3-year period
- NPLs/Gross loans improve to 5% or below over the next 12-15 months
Factors that could, individually, or collectively lead to a lowering of the ratings and/or outlook include:
- A deterioration in the credit rating of the sovereign over the next 12-15 months
- A sustained increase in the cost of funds by 100 bps or greater over the next 12-15 months
- NPL’s >8% over the next 12-15 months
- A deterioration of the total earning assets/ total interest-bearing liabilities ratio to < 1 time
COMPANY BACKGROUND
Home Mortgage Bank (HMB) was established in the Republic of Trinidad and Tobago (T&T) under the Home Mortgage Bank Act of 1985 and commenced business in October 1986. HMB is 100% owned by the National Insurance Board of Trinidad and Tobago (NIBTT)[1].
HMB’s principal business activities include the trading of residential mortgages originated by primary mortgage lenders[2] and commercial lending. The Bank’s loan product offerings include loans for land acquisition for commercial purposes, bridge financing, commercial mortgage loans, project financing, and Public/Private Sector Partnerships (PPP)[3]. Its Mortgage-Backed securities include Collateralized Mortgage Obligations (CMOs), the Mortgage Participation Fund (MPF) and the Samaan Tree Fund (STF). The mutual funds established by HMB are backed by a segregated pool of residential mortgages. The Bank also issues taxable and tax-exempt Bonds. The Bank is a non-deposit taking institution and derives most of its funding from the issuance of medium-term and long-term bonds; additional funding is also provided through inflows from the MPF, STF and the CMOs. HMB currently has three 100%-owned subsidiaries, Tobago Fairways Villas Limited, Tobago Plantation House Limited, and Tobago Fairways Management Limited. These subsidiaries are engaged primarily in real estate development.
On August 6, 2021, the Board of the National Insurance Board of Trinidad and Tobago (“NIBTT”), as well as the Boards of the Trinidad and Tobago Mortgage Finance Company Limited (“TTMF”) and Home Mortgage Bank (“HMB”) formally approved the merger of TTMF and HMB. A team of advisors led by PricewaterhouseCoopers Advisory Services Limited (“PwC”) is providing implementation support for the merger. The approved method for the merger is a Distribution in Specie, whereby all assets and liabilities of the liquidated HMB will be transferred to TTMF.
[1] Previously 0.6% of HMB’s shares were held by British American Insurance Company (Trinidad) Limited, but NIBTT acquired these residual shares in 2017.
[2] Include the local commercial banks, non-bank mortgage institutions and credit unions.
[3] For 2019, the portfolio comprised project financing, commercial facilities for land development and construction of multi and single-family homes for re-sale. In addition, to their primary commercial mortgage portfolio, HMB continues to purchase secondary mortgages from TTMF.
Analytical Contacts:
Nadia Sanchez
Tel: 1-868-627-8879 Ext. 229
E-mail: [email protected]
Anelia Oudit
Tel: 1-868-627-8879 Ext. 226
Mobile: 1-868-487-8364
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.