Fitch ratings have maintained its outlook on
) at 'Stable' as a part of its review of four rated investment
managers. Despite a decent first quarter 2012 results, the outlook
remains unchanged as the agency is concerned about the impact of
volatile equity markets on the company's financials.
Rationale for Stable Outlook
Invesco reported a moderate quarterly performance along with
continuous growth in assets under management as well as enhanced
debt and leverage ratios. The balance sheet also remained low on
risk quotient. Benefits availed from the acquisition of Van Kampen
also contributed to the marginally improved performance.
Results mainly benefited from increased net revenue, partially
mitigated by rising operating expenses. Net revenue inched up 2.7%
sequentially and 1.7% year over year to $736.3 million, whereas
operating expenses hiked 1.4% sequentially and 3.3% year over year
to $467.1 million.
As of March 31, 2012, leverage ratio stood at 1.03 to1.00 as
against 1.01 to1.00 as of December 31, 2011 whereas interest
coverage ratio was 22.06 to 1.00 compared with 22.93 to 1.00 as of
December 31, 2011.
The long-term issuer default ratings and senior unsecured debt
ratings of Invesco as well as its subsidiaries - Invesco Holding
Company Ltd and IVZ, Inc. - remained unchanged at 'A-'.
Fitch expects Invesco to maintain its current rating given a
lack of steadiness in the equity market. However, Invesco's ratings
may benefit from the constant improvement in debt and leverage
ratios along with expansion of operational activities. On the other
hand, sudden unfavorable changes in equity markets and unexpected
losses from its business activities will significantly affect
Fitch's outlook on the company.
Rating action on Other Companies
Other investment managers under Fitch's scrutiny were
Alliance Bernstein Holding L.P.
Affiliated Managers Group Inc.
) and Schroders plc. Fitch has reiterated 'Stable' rating on all
Though the outlook and ratings remain unchanged, we remain
cautious about Invesco's rising expenses that have the potential to
dent its profitability in the upcoming quarters. However, the
company's extensive share deployment activities will reinforce
investors' confidence in the stock. Moreover, opportunities
stemming from enhanced global investment flows will likely promote
its expansion activities.
Persistent problems in the overall economy, especially
volatility of U.S. dollar and stressful equity markets, pose
serious threat to the company.
Currently, shares of Invesco retain a Zacks #5 Rank, which
translates into a Strong Sell rating. Considering the fundamentals,
we also maintain a long term Underperform recommendation.
ALLIANCEBERNSTN (AB): Free Stock Analysis
AFFIL MANAGERS (AMG): Free Stock Analysis
INVESCO LTD (IVZ): Free Stock Analysis Report
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