OREANDA-NEWS. Fitch Ratings has assigned Turkey's Kapital Faktoring A.S. (Kapital) a National Long-term Rating of 'A+(tur)' with a Stable Outlook.

KEY RATING DRIVERS
The rating reflects Kapital's position as a leading, independent company in Turkey's fragmented factoring sector. Kapital is the largest non-bank owned factoring company in Turkey by domestic factoring receivables, and has a successful track record of sound financial metrics. However, in absolute terms, Kapital is small relative to Turkey's financial sector.

Fitch's assessment of Kapital's company profile takes into consideration that it is a monoline business where with-recourse factoring receivables made up 98% of its total assets at end-2015. It mainly targets the SME and micro-commercial customer segments, in which competition is intense. Fitch believes these customer segments are susceptible to developments in the Turkish economic environment, which can be volatile.

Supportive shareholders have allowed Kapital to operate with high capital adequacy ratios (equity/assets: 40.3% at end-2015) and its significant capital buffers should enable it to absorb unexpected losses. Leverage and gearing ratios are also comfortable for the rating level and Kapital has consistently operated with a debt/equity ratio of around 1.5x or below.

Credit losses to date have been low and the impaired receivables ratio (based on amounts overdue by 90+ days) reached a low 2.4% at end-2015, which compares well with peers and the sector average (5.6%). However, the rating also captures the short-term and concentrated nature of factoring receivables, which heightens risks at Kapital.

Margins are well above the sector average and performance indicators achieved by Kapital consistently outperform peers'. Strong earnings and profitability over volatile interest rate and economic cycles enable Kapital to regularly distribute dividends, but also retain a high portion of earnings, further growing the equity base.

The rating also captures Kapital's reliance on typically short-term wholesale funding. Nevertheless, market access has been reasonable and Kapital typically utilises less than half of its credit lines from Turkish banks, albeit these are not committed.

RATING SENSITIVITIES
Downward rating pressure could arise if there is significant deterioration in asset quality and a material increase in leverage and/or receivables concentrations.However, as long as management continues to develop its profitable business prudently, downward rating pressure should be contained. Kapital's rating is also sensitive to reputational risk, which Fitch does not currently expect, and to deterioration in the operating environment.

A continued successful track record of operations and a diversification of funding sources could create moderate upside for Kapital's rating.