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TEXT-Fitch affirms Credit Agricole at 'A+'; outlook negative

(The following statement was released by the rating agency)

Oct 09 - Fitch Ratings has affirmed Credit Agricole's (CA) Long-term Issuer Default Rating (IDR) at 'A+' with a Negative Outlook and Short-term IDR at 'F1+'. At the same time, the agency has affirmed the Viability Rating (VR) at 'a', Support Rating Floor at 'A+' and Support Rating at '1'. A full list of rating actions is at the end of this rating action commentary.

RATING ACTION RATIONALE

CA's Long- and Short-term IDRs, Support Rating and Support Rating Floor continue to reflect the potential support from France ('AAA'/Negative), if required. The Negative Outlook on CA's Long-term IDR reflects that of France's Long-term IDR. CA is not a single entity, but a cooperative banking group. Its 39 regional banks (caisses regionales; CRs) and central body (Credit Agricole S.A.; CA S.A.) benefit from a cross-support mechanism. Fitch has the same IDRs for CA and CA S.A. Fitch considers there to be an extremely high probability that support from the French authorities would be forthcoming if needed. CA is the leading French retail bank (with a 25% market share of customer deposits) and is systemically important.

CA's VR reflects its strong French retail franchise, solid overall asset quality, limited market risk and solid funding base. It also considers CA's modest profitability, an only adequate Fitch Core Capital ratio and exposure to southern Europe. CA is focusing on the mature low-risk/low-return French retail banking activities more than many of its peers and has reduced its ambitions in corporate and investment banking (CIB). The group has also largely implemented an adjustment plan to reduce its funding needs.

RATING DRIVERS AND SENSITIVITIES - IDRS, SUPPORT RATING AND SUPPORT RATING FLOOR

CA's Long- and Short-term Term IDRs are driven by support and the Long-term IDR is at the same level as its Support Rating Floor. The Long- and Short-Term IDRs, Support Rating and Support Rating Floor would be sensitive to a decrease in France's ability (as measured by its rating) or willingness to support CA. A downgrade of France's Long-term IDR by one notch (to 'AA+') would lead to a downgrade of CA's Support Rating Floor and Long-term IDRs to 'A' and Short-term IDR to 'F1'. These ratings could also be downgraded if Fitch came to the conclusion that government support in France was being diluted through a combination of regulatory, legal and political changes.

RATING DRIVERS AND SENSITIVITIES - VR

Fitch expects CA's operating profitability to remain subdued in the short-term given lower revenues as a result of deleveraging and continued high loan impairment charges. This means that CA's loss absorption capacity and capital generation is likely to be weaker. CA is increasing its capital ratios and targeting a fully loaded Basel III core equity Tier 1 ratio of 10% by end-2013. This would be commensurate with its 'a' VR as long as the group's modest capital generation improved.

CA's announcement of exclusive negotiations to sell its Greek subsidiary (Emporiki Bank of Greece) will reduce its exposure to southern Europe. The estimated pre-tax loss of roughly EUR3bn, while at the upper end of Fitch's expectations, is consistent with the group's current VR. This loss includes the EUR2.3bn capital injection made in July and an additional EUR0.6bn still to be made. However, the after-tax impact will be lower. Moreover, the funded exposure to Emporiki will decline given the additional capital increase and this exposure will be collateralised by high quality assets.

CA's VR is negatively sensitive to any unexpected deterioration in earnings or weakening of capital ratios. A VR upgrade is unlikely in the near term and would require a strong increase in on-going internal capital generation, which Fitch considers possible to achieve in the medium term given the bank's strong franchise.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt and other hybrid capital issued by Credit Agricole S.A., CA Preferred Funding Trust, CA Preferred Funding Trust II and CA Preferred Funding Trust III are all notched down from CA's VR in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles, which vary considerably. Their ratings are primarily sensitive to any change in CA's VR.

SUSBIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIES

The Long-and Short-term IDRs and Support Rating of the group's French subsidiaries - Credit Agricole Corporate and Investment Bank , CA Consumer Finance and Credit Agricole Leasing & Factoring - are based on an extremely high probability of support from CA if needed and are therefore sensitive to changes in CA's IDRs. The ratings of these subsidiaries could also be sensitive to changes in their core strategic importance to the group.

Credit Agricole North America, Credit Agricole CIB Finance (Guernsey) and Credit Agricole CIB Financial Products (Guernsey) are wholly owned financing subsidiaries of Credit Agricole Corporate and Investment Bank whose debt ratings are aligned with those of Credit Agricole Corporate and Investment Bank based on an extremely high probability of support if required and whose ratings are sensitive to the same factors that might drive a change in Credit Agricole Corporate and Investment Bank's IDR.

The rating actions are as follows: CA: Long-term IDR: affirmed at 'A+'; Outlook Negative Short-term IDR: affirmed at 'F1+' Viability Rating: affirmed at 'a' Support Rating: affirmed at '1' Support Rating Floor: affirmed at 'A+' Credit Agricole S.A. (CA's central body): Long-term IDR: affirmed at 'A+'; Outlook Negative Short-term IDR: affirmed at 'F1+' Support Rating: affirmed at '1' Support Rating Floor: affirmed at 'A+' Senior debt: affirmed at 'A+' Short-term debt: affirmed at 'F1+' Lower Tier 2: affirmed at 'A-' Upper Tier 2: affirmed at 'BBB' Innovative Tier 1: affirmed at 'BBB-' Non-Innovative Tier 1: affirmed at 'BBB-'

CA Preferred Funding Trust, CA Preferred Funding Trust II, CA Preferred Funding Trust III:

Preferred stock: affirmed at 'BBB-' Credit Agricole North America: Commercial paper: affirmed at 'F1+' Credit Agricole Corporate and Investment Bank: Long-term IDR: affirmed at 'A+'; Outlook Negative Short-term IDR: affirmed at 'F1+' Support Rating affirmed at '1' Senior debt: affirmed at 'A+' Senior debt: affirmed at 'AAA(THA)' Market-linked securities: affirmed at 'A+emr' Short-term debt: affirmed at 'F1+' Credit Agricole Corporate and Investment Bank (South Africa Branch): Long-term senior debt: affirmed at 'AAA(zaf)' Credit Agricole CIB Finance (Guernsey): Senior debt: affirmed at 'A+' Market-linked securities: affirmed at 'A+emr' Short-term debt: affirmed at 'F1+' Credit Agricole CIB Financial Products (Guernsey): Senior debt: affirmed at 'A+' Market-linked securities: affirmed at 'A+emr' Short-term debt: affirmed at 'F1+' CA Consumer Finance: Long-term IDR: affirmed at 'A+'; Outlook Negative Short-term IDR: affirmed at 'F1+' Support Rating: affirmed at '1' Senior debt: affirmed at 'A+' Short-term debt: affirmed at 'F1+' Credit Agricole Leasing & Factoring: Long-term IDR: affirmed at 'A+'; Outlook Negative Short-term IDR: affirmed at 'F1+' Support Rating: affirmed at '1' For all of Fitch's Eurozone Crisis commentary go to ((Bangalore Ratings Team, Hotline: +91 80 4135 5898, Bhanu.priya@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Bhanu.Priya.reuters.com@reuters.net))