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May 28 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Yapi Kredi Portfoy Yonetimi's (Yapi Kredi) Asset Manager Rating at 'Highest Standards (tur)'. The Outlook is Stable.
KEY RATING DRIVERS
The affirmation reflects Yapi Kredi's well-established, expanding domestic franchise and an increasingly diversified business and client mix. It takes into account the firm's robust investment, risk and governance framework and operational and IT platform, as well as the depth and overall stability of its staff.
Key challenges facing Yapi Kredi are adapting its business model and practices to a changing regulatory environment. A related challenge is the completion of the technological upgrade in a timely manner.
Yapi Kredi's 'Highest Standards (tur)' rating is based on the following category scores:
As the second-largest asset manager in Turkey, Yapi Kredi has an established market presence, well supported by the banking network of its parent Yapi Kredi Bank (YKB). Support from shareholders and strong, stable profitability (63% operating margin) provide solid funding of investment, IT and regulatory needs. Depth, adequacy and overall stability characterise Yapi Kredi's staffing.
Yapi Kredi has an effective risk and governance framework that is well-embedded in the business and also benefits from the independent oversight of control functions and committees. Yapi Kredi's internal control, compliance and audit practices are in line with international standards.
Yapi Kredi's traditional, research-driven investment process is implemented in a disciplined and controlled manner. Key investment decisions are taken by consensus and documented at a weekly investment committee.
The operating model is simple given that almost all transactions are currently executed on the Istanbul Stock Exchange and that Takasbank is Turkey's central custody provider. Yapi Kredi's operations and IT are outsourced to YKB. Client reporting, which is aligned with local market practices, is produced at Yapi Kredi.
Yapi Kredi's IT platform is overall robust and fulfils the requirements of the funds and mandates managed. A significant IT project, initiated in 2013 and to be completed in 3Q14, is integrating front- and back-office systems, adding new modules to the platform and adapting processes to new regulatory requirements. In Fitch's view, system migrations tend to temporarily increase operational risk, but sound project governance, dedicated IT resources and sound progress made so far mitigate perceived risks.
Yapi Kredi is owned by a strategic equal partnership of Koc Group and UniCredit. It had TRY10.7bn assets under management at end-2013, 70% of which was invested in fixed income assets. It provides a range of asset management products and services, including mutual funds, discretionary portfolio management for corporate and individual clients, investment advisory services, private pension fund management and private fund management.
The rating may be sensitive to material adverse changes to any of the aforementioned rating drivers, notably through weakened financial conditions, heightened staff turnover, deterioration of processes and policies, inability to comply with new regulatory requirements, or significant operational or IT failure.
Link to Fitch Ratings' Report: YapA± Kredi Portfoy Yonetimi A.Až.