Research: Rating Action: Moody’s affirms Iris Financial Services Limited’s B1 CFR; outlook stable

New York, September 21, 2022 — Moody’s Investors Service has affirmed Bermuda-based Iris Financial Services Limited’s (Iris) B1 corporate family rating (CFR). The rating outlook is stable.


..Issuer: Iris Financial Services Limited

…. Corporate Family Rating, Affirmed B1

Outlook Actions:

..Issuer: Iris Financial Services Limited

….Outlook, Remains Stable


The affirmation of Iris’ B1 CFR reflects the company’s adequate capitalization and contained asset risks supported by its focus on payroll-deducted loans in Colombia, a product with a relative lower risk in relation to other consumer lending. However, the B1 rating also incorporates risks related to the company’s limited business diversification and strategic scope to relatively riskier consumer-segment in the highly competitive product. Despite Iris’ strong recurring earnings generation through the cycle, its short-term secured funding mix exposes the company to liquidity risks in times of heightened market volatility and tightening monetary conditions, resulting in profitability pressures. As a holding company, Iris’ consumer lending franchise and insurance operations are conducted through its subsidiaries ExcelCredit S.A.S (ExcelCredit, domiciled in Colombia) and Golden Tree Reinsurance Limited (Golden Tree, domiciled in Bermuda), respectively.

Iris’ funding profile is predominantly wholesale, therefore, inherently more sensitive to investors’ confidence and market conditions. The short-term nature and high level of secured funding facilities also increases its price sensitivity in a rising interest rate cycle, negative drivers to its earnings and liquidity. Therefore, the tightening of market conditions and the increase of interest rates in Colombia have pressured Iris’ funding costs, challenging its liquidity profile and its profitability metrics as well. However, over the past months, the company has been able to maintain and even extend credit lines with local banks, which supported the affirmation of the B1 rating. In June 2022, the company’s consolidated debt maturity coverage remained at a modest 40%, in line with the level of 2021 year-end and well below the 63% ratio in 2020. However, Iris continues to rely on funding from secured sources, which reached roughly 45% of tangible assets in June 2022, a constrain to its financial flexibility.

In terms of profitability, the quick rise in interest rates in Colombia, with the monetary policy rate up by 725 basis points in the past 12 months, pressured Iris’ net interest margins down to 4.6% annualized in June 2022, down from 6.2% in 2021. Iris consolidated net income remained strong at 3.3% of average managed assets in June 2022, which is higher than that reported by other consumer lenders in Colombia in the same period, but still well below the 6.2% and 4.8% reported by the company at the end of 2021 and 2020, respectively. In the period, bottom line results were supported by relatively low credit costs compared with other consumer lenders, and loan loss provisions stood at an annualized 1.8% of gross loans in June 2022, with a low non-performing of 2.8%, and no charge-offs in the period. Iris maintained adequate capital levels, with an estimated tangible common equity to tangible managed assets (TCE/TMA) of 23% as of June 2022, which helps to mitigate the liquidity challenges and provides adequate loss absorption capacity.

Iris corporate structure and related party transactions, including funding and portfolio sales to the group’s affiliates, weigh negatively on its credit profile as it creates opacity and complexity. Its concentrated ownership is also a challenge to the company’s governance risks, despite adequate risk management practices adopted since its inception in 2016.

The stable outlook on Iris’ B1 corporate family rating (CFR) reflects Moody’s view that despite the abovementioned challengng scenario, the company’s risk profile will remain consistent with its B1 rating over the outlook horizon, supported by its adequate capital and contained asset risks.


Iris’ CFR could be upgraded if the company improves its funding structure and liquidity profile through access to unsecured resources, that could enhance its financial flexibility. Positive rating pressure would also arise as Iris is able to successfully implement its current growth strategy while maintaining strong earnings, asset quality and capital adequacy.

On the other hand, Iris’ CFR could be downgraded if there is material, and unexpected, deterioration in capitalization, earnings generation and/or liquidity. In particular, given Iris’ high reliance on short-term secured funding, further increase in secured debt relative to its assets or an increased asset-liability maturity mismatch would exert downward rating pressure.

The principal methodology used in this rating was Finance Companies Methodology published in November 2019 and available at Alternatively, please see the Rating Methodologies page on for a copy of this methodology.


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Marcelo De Gruttola
Vice President – Senior Analyst
Financial Institutions Group
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Ceres Lisboa
Associate Managing Director
Financial Institutions Group
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