June 18, 2014 / 9:17 PM / 3 years ago

Fitch Affirms Schroders at 'A+'/'F1'; Outlook Stable

(The following statement was released by the rating agency) LONDON, June 18 (Fitch) Fitch Ratings has affirmed Schroders plc's (Schroders) Long- and Short-term Issuer Default Ratings (IDR) at 'A+' and 'F1', respectively. The Outlook on the Long-term IDR is Stable. The operating environment for traditional investment managers (IM) remains favourable, driven by improved global equity markets that have lifted assets under management (AUM) levels and attracted investor flows. This has resulted in robust fee revenue generation, improved investment performance and stable operating margins, supported by continued cost discipline. Leverage levels have generally declined and, in some cases, have been reduced to zero, driven by improved cash flow generation and debt repayment. Many traditional IMs have taken advantage of favourable capital markets and low interest rates to refinance debt at attractive spreads, which should improve interest coverage. Liquidity remains strong, with most traditional IMs operating at or near negative net debt position. These positive trends are tempered by the cyclical nature of market value appreciation, potential performance and reputational risks in a rising interest rate environment and regulatory uncertainty surrounding IMs and/or their funds. KEY RATING DRIVERS Schroders' IDRs reflect the company's well-diversified, strong franchise as well as robust liquidity and capital reserves. The ratings also reflect healthy, albeit potentially volatile, profitability and high operational leverage which is characteristic of its business model. Schroders' investment performance has been robust and has generally outperformed benchmark returns, while its profitability has consistently been among the highest of asset managers rated in the 'A' category. Schroders' IDR is at the top-end of the ratings assigned to traditional asset managers and is supported by the absence of debt, the company's low tolerance for leverage and a strong risk management framework. Schroders also takes deposits and has a small lending business (about USD1bn) associated with its private clients, which means that balance sheet utilisation is higher than for most traditional asset managers. However, Fitch considers that this is appropriately capitalised. Schroders further strengthened its franchise during 2013 with the acquisition of STW Fixed Income Management LLC (STW) and Cazenove Capital Holdings Limited (Cazenove). The Cazenove acquisition significantly enhanced Schroders' scale and capabilities for private clients and charities in the UK and added complementary asset classes and AUM in wealth and asset management. STW was a smaller acquisition of a US-based fixed income manager, broadening the fixed income offering and extending Schroders' institutional client base in the US. RATING SENSITIVITIES There is limited upside potential for the ratings, given Schroders' current high ratings and the sensitivity of AUM, earnings and cash flow to global financial market trends. Downward pressure could arise from a substantial and sustained increase in leverage or decrease in liquidity, material reputational damage, sustained weakening of performance or notable AUM net outflows. Contact: Primary Analyst Denzil De Bie Director +44 20 3530 1592 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Alan Milne Associate Director +44 20 3530 1491 Committee Chairperson Nathan Flanders Managing Director +1 212 908 0827 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1003, Email: Elaine.Bailey@fitchratings.com; Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, Global Financial Institutions Rating Criteria, dated 31 January 2014 and Investment Manager and Alternative Funds Criteria, dated 12 December 2013 are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Investment Manager and Alternative Funds Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below