BCA upgraded to baa3
London, 08 March 2017 -- Moody's Investors Service has today upgraded Banque PSA Finance
(BPF)'s long-term deposit and senior unsecured ratings to
A3 with a stable outlook from Baa2 with a stable outlook. Moody's
also upgraded BPF's baseline credit adjustment (BCA) and adjusted
BCA to baa3 from ba1. Concurrently, BPF's long-term
counterparty risk assessment (CRA) was upgraded to A3(cr) from Baa1(cr).
Moody's affirmed the short-term deposit ratings at Prime-2
and the short-term CRA at Prime-2(cr). The Aa2 backed
senior unsecured rating was withdrawn, as BPF has redeemed all its
outstanding debt guaranteed by the French government.
The upgrade of BPF's BCA to baa3 reflects significant changes to
its financial fundamentals since it entered into a partnership with Santander
Consumer Finance S.A. (Santander CF, A3/A3 stable,
baa2). In particular, the BCA reflects BPF's high solvency
and liquidity, which is partly offset by the concentration of its
exposures to a single business. The BCA does not however exceed
the adjusted BCA of PSA Banque France (PSA BF, Baa1/Baa1 stable,
ba1), as Moody's considers that BPF's probability of
failure is intrinsically linked to that of its operating subsidiary.
The rating agency's Loss Given Failure (LGF) analysis concludes
that there is an extremely low loss-given-failure for both
BPF's deposits and senior unsecured debt, resulting in three
notches of uplift from the adjusted BCA of baa3.
These rating actions have been taken in conjunction with the action on
PSA Banque France (PSA BF), BPF's operating subsidiary in
France. For further details on PSA BF's rating action,
please refer to the press release "Moody's upgraded PSA Banque
France's long-term deposit, senior unsecured and issuer
ratings to Baa1; outlook stable" link
https://www.moodys.com/research/--PR_362729).
These rating actions are not driven by the action taken on Peugeot S.A.
(PSA Group Ba2 stable), which followed the announcement of 6 March
2017 that PSA Group will acquire GM's Opel/Vauxhall subsidiary and
that BPF jointly with BNP Paribas Personal Finance (A1/A1 stable,
ba1) will acquire GM Financial's European operations, and
do not take account of any potential impact of this transaction.
For further details on PSA Group's rating action, please refer
to the press release "Moody's affirms Peugeot's Ba2
CFR; stable outlook", published on 6 March 2017 (https://www.moodys.com/research/--PR_362419).
A full list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
BPF's BCA REFLECTS HIGH SOLVENCY AND SOUNDS LIQUIDITY BUT IS CONSTRAINED
BY ITS OPERATING SUBSIDIARY'S CREDITWORTHINESS
As a result of the partnership with Santander CF, BPF holds minority
interests in a number of joint-ventures (JVs) operated by the two
entities. BFP retains full control over the very limited activities
outside the scope of this partnership (approximately 2% of the
whole group's loans) and Moody's expects this to remain the
case. As BPF's stakes in the JVs are more than fully financed
with equity, BPF's funding needs have dramatically fallen
and most of its debts have already been redeemed. The bank's
total assets at year-end 2016 were EUR2.7 billion,
of which EUR1.5 billion represent equity stakes in the JVs,
while shareholders' equity represents 74% of total liabilities
(EUR2.1 billion).
BPF's solvency is thus high as the asset risk arising from the equity
invested in the operating JVs is mitigated by its substantial capital.
Its funding structure and liquidity position are also sound. BPF's
own operations are financed with some wholesale funding, but this
risk is mitigated by substantial on-balance sheet liquid assets
and liquidity lines provided by credit institutions.
Despite its relatively strong financial profile, BPF's creditworthiness
is nevertheless constrained by both its monoline focus and the inherent
concentration of its exposures to the broader joint ventures managed by
Santander CF, limiting its adjusted BCA to that of PSA BF.
LGF ANALYSIS RESULTS IN EXTREMELY LOW LOSS-GIVEN-FAILURE
FOR DEPOSITS AND SENIOR UNSECURED DEBT
Moody's LGF analysis of BPF assumes that (1) BPF's resolution
will be separate from that of its operating subsidiaries; and (2)
its equity stakes in the JVs have no value when BPF itself reaches the
point of non-viability. However, under this scenario,
Moody's believes that BPF would still have substantial excess equity
and this is reflected in an assumption of residual tangible common equity
equivalent to 10% of total assets rather than the standard assumption
of 3%.
BPF's deposits and senior unsecured debt thus benefit from an extremely
low loss-given-failure thanks to the loss absorption provided
the substantial equity cushion and the volume of senior unsecured debt,
resulting in three notches of uplift in each case relative to the bank's
adjusted BCA.
RATIONALE FOR THE OUTLOOK
The stable outlook reflects the fact that Moody's does not expect
any significant change in the creditworthiness of the operating subsidiaries,
nor in the financial structure of BPF over the outlook horizon.
WHAT COULD CHANGE THE RATING UP/DOWN
To the extent BPF's BCA is currently constrained by PSA BF's
adjusted BCA, BPF's BCA would be upgraded if PSA BF's
adjusted BCA were upgraded. This could in turn result in an upgrade
of BPF's deposit and senior unsecured ratings.
A downgrade of BPF's BCA could be triggered by a downgrade of PSA
BF's adjusted BCA. The BCA could also be downgraded if BPF
moved a substantial amount of capital to its parent, or if it significantly
increased its investments in the operating subsidiaries without raising
its capital base but by using wholesale funding instead.
BPF's long-term ratings would be downgraded if BPF's
BCA were downgraded. They could also be downgraded if the excess
capital available for BPF's residual activities after full deduction
of its equity stakes in the JVs were to materially reduce.
LIST OF AFFECTED RATINGS
Issuer: Banque PSA Finance
..Upgrades:
....Long-term Counterparty Risk Assessment,
upgraded to A3(cr) from Baa1(cr)
....Long-term Deposit Ratings,
upgraded to A3 Stable from Baa2 Stable
....Senior Unsecured Regular Bond/Debenture,
upgraded to A3 Stable from Baa2 Stable
....Senior Unsecured Medium-Term Note
Program, upgraded to (P)A3 from (P)Baa2
....Adjusted Baseline Credit Assessment,
upgraded to baa3 from ba1
....Baseline Credit Assessment, upgraded
to baa3 from ba1
..Affirmations:
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
....Short-term Deposit Ratings,
affirmed P-2
..Withdrawal:
....Backed Senior Unsecured Regular Bond/Debenture,
previously rated Aa2 Stable
..Outlook Action:
....Outlook remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Items color coded in purple in this Press Release relate to unsolicited
ratings for a rated entity which is non-participating.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Yasuko Nakamura
VP - Senior Credit Officer
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
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