The credit rating of DeltaLeasing LLC (hereinafter, DeltaLeasing or the Company) at AA-(RU), outlook Stable, takes into account ACRA’s expectations that in the next 12–18 months, the Company will continue to gradually strengthen its high market positions in the equipment leasing segment under its current business model, while maintaining diversification of operations, and strong metrics for asset quality, equity and earnings. The Agency does not expect the ownership structure to change in the medium term.
DeltaLeasing is a leasing company registered in the Primorsky Krai, but operating throughout Russia with relatively comparable scales of business in different regions, including the Central, Siberian, Volga, Far Eastern and Northwestern Federal Districts. The Company’s key area of activity is leasing of equipment, where diversification of its types (metalworking and mechanical engineering equipment, construction equipment, devices for the production of plastics, tools for the food industry, and other types of property) and the industries served can also be observed. DeltaLeasing operates as part of a recently founded leasing group, Insight Leasing LLC, which, in ACRA’s opinion, unites relatively independent leasing organizations. Prior to 2022, the Company had a fundamentally different ownership structure (the previous name was Siemens Finance), was part of the German company Siemens AG, and specialized in the leasing of equipment and machinery, including directly or indirectly related to products, including components, of the international company Siemens.
KEY ASSESSMENT FACTORS
The adequate business profile assessment is based on the Company’s solid market positions in the equipment leasing segment coupled with good business diversification by types of property leased for financial leasing and industries of lessees (metalworking and mechanical engineering, food industry, mining industry, trade, plastics production, construction, services, transport, etc.).
ACRA positively assesses the Company’s many years of experience and accumulated expertise on a wide range of equipment types. This was largely facilitated by the international experience of the global group, Siemens AG, which the Company was part of until 2022, that also provided access to the best practices in corporate governance. These competitive advantages, coupled with good digitalization of business, in the Agency’s opinion, contribute to its stability, facilitate the attraction and retention of clients, and also help to correctly assess risks when structuring leasing transactions and monitoring the condition of leased equipment. ACRA notes the presence of full-time equipment maintenance engineers who support leasing transactions at all stages (including consulting clients on the technical features of equipment), assess property risks, and conduct regular monitoring of the operation and technical condition of the leased property. These approaches are valued by clients and ensure additional monitoring of the financial condition of lessees, forming a more comprehensive picture of the risk profile.
The Company’s leasing business is also relatively well diversified in terms of Russia’s regions. However, ACRA notes that physical points of presence cannot be found everywhere due to well-established remote sales channels, including developed personal accounts of clients. Although this state of affairs allows for the optimization of administrative costs, it can complicate and delay the processes of seizure of leased items in the event of an unforeseen deterioration in the payment discipline of lessees.
According to the Agency’s expectations, over the next 12 to 18 months, DeltaLeasing will continue to develop in line with its current diversified business model, increasing the lease portfolio by 15–20% per year. The Company’s business efficiency is evidenced by the relatively high values of return on average assets (5.7% and 4.5% in 2023 and 2024, respectively) and net interest margin (approximately 13% in 2023–2024).
Strong assessment of capital adequacy and profitability. The capital adequacy ratio (CAR; adjusted for the volume of intangible assets according to ACRA’s methodology) was 26% at the start of this year. ACRA expects the CAR to decline gradually over the next 12 to 18 months and remain no lower than the 18–20% targeted by the Company. The indicator will diminish amid growth of the leasing business and dividend payments, the size of which have not yet been determined and will be established based on the capacity to support the target CAR.
Business profitability corresponds to a strong assessment — the averaged capital generation ratio (ACGR) calculated for the past five years was 367 bps (ACRA adjusts this value for the significant amount of dividend payments in 2023–2024, which were one-time in nature, since they represent the return of excess capital provided by the new owners in 2022). Profitability of leasing will be supported over the next 12 to 18 months by the renewal of lease assets, taking into account higher rates in the economy (the increase in the cost of money over the previous 18 months has already been reflected in the cost of liabilities).
The strong risk profile assessment is determined by the combination of the low level of non-performing assets in the lease portfolio, which did not exceed 5%, and the low concentration on individual counterparties (the 10 largest lessees account for around 7% of the portfolio).
ACRA does not see any signs of accumulation of significant credit risks through the growth of seized lease items or non-performing receivables under terminated contracts, and therefore has not applied additional adjustments to the factor assessment.
Adequate funding assessment. The main source of funding is bank loans, which accounted for approximately 53% of the balance as of the start of the year, with equity accounting for around 26%.
Concentration on individual bank creditors is relatively noticeable: the largest counterparty finances 19% of assets while the five largest banks finance almost half. In the longer term, DeltaLeasing plans to considerably grow its bond funding (in 2024 it made its first placements), which may result in better diversification of the resource base. ACRA will monitor the execution of this plan.
Satisfactory liquidity position. ACRA does not expect any major changes to the Company’s liquidity management over the next 12 to 18 months; the current liquidity ratio in the Agency’s base case forecast is presently within 1.0–1.1. In the stress scenario (which assumes cash flows from lessees declining by 20%), the need to obtain emergency liquidity may be covered by a suspension of operations and employing unused credit lines from major bank groups.
KEY ASSUMPTIONS
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Maintaining the Company’s current business model over the next 12 to 18 months;
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Maintaining the CAR above 18% and ACGR for the past five years above 300 bps.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
- Considerable improvement of funding structure diversification.
A negative rating action may be prompted by:
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Five-year ACGR falling below 300 bps;
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CAR falling below 18%;
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Significant deterioration of asset quality due to growth of the share of non-performing assets in the lease portfolio and/or accounts receivable under terminated contracts and/or the volume of seized equipment and/or other manifestations of increased risks;
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Higher concentration of the Company’s resource base.
rating components
Standalone creditworthiness assessment (SCA): aa-.
Adjustments: none.
Support: none.
issue ratings
No outstanding issues have been rated.
regulatory disclosure
The credit rating has been assigned to DeltaLeasing LLC under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Leasing Companies on the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
A credit rating has been assigned to DeltaLeasing LLC for the first time. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The rating analysis was performed using the IFRS and RAS financial statements of DeltaLeasing LLC. The credit rating was assigned based on data provided by DeltaLeasing LLC, information from publicly available sources, and ACRA’s own databases. The credit rating is solicited and DeltaLeasing LLC participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to DeltaLeasing LLC. No conflicts of interest were discovered in the course of credit rating assignment.
