MOODY'S CONFIRMS WITH A NEGATIVE OUTLOOK Aa3 LONG-TERM DEPOSIT RATINGS OF BANQUES POPULAIRES GROUP; LOWERS FINANCIAL STRENGTH RATINGS TO C+; CONFIRMS WITH A POSITIVE OUTLOOK A2 LONG-TERM DEPOSIT RATING OF NATEXIS BANQUE
Paris, 06-15-98 -- Moody's Investors Service confirmed the Aa3 long-term debt and deposit ratings of the Banques Populaires Group. The rating outlook remains negative. At the same time, Moody's lowered the financial strength rating of Banques Populaires Group at C+ from B. Moody's also confirmed the A2 long-term debt and deposit ratings of Natexis Banque, changing the rating outlook to positive from stable. The short-term ratings of the Banques Populaires and Natexis Banque were not under review and were confirmed at Prime-1. Natexis Banque's financial strength rating was also confirmed at D+. The ratings of Natexis's long-term debt guaranteed by the Republic of France were not under review and remain unchanged at Aaa.
These rating actions conclude a review for possible downgrade on Banques Populaires, and a review for possible upgrade on Natexis, both initiated in March 1998 as a result of Banques Populaires's tender offer for Natexis. Following the successful outcome of their offer, Banques Populaires now hold 71.4% of the capital of Natexis S.A., the holding company of the Natexis Group.
Commenting these various rating decisions, Moody's said that the lowering of Banques Populaires Group's financial strength rating to C+ reflected its belief that its increased stake in Natexis would dilute its earnings profile, at least for some time, considering that the outlook for Natexis significantly improving its profitability in the near future remains uncertain. In addition, Moody's expects that the realization of the anticipated benefits coming from synergy between the two banking groups will be slowed down by operational constraints and business-culture differences, although the business line integration should be facilitated by the ties between the two groups. Furthermore, Banques Populaires's plans to become more active in middle-market business lending should represent another meaningful challenge.
The Aa3 long-term ratings of Caisse Centrale des Banques Populaires and the 13 regional banks continue to reflect the quality of the group's franchise -- epitomized by a nationwide domestic coverage of nearly 2,000 branches -- successful expansion in retail banking, and the strong retail deposit base. These characteristics position well Banques Populaires in the French domestic market ahead of the monetary union. In addition, the Natexis acquisition gives the Banques Populaires access to certain fields of expertise in commercial banking and export financing and could translate into cross selling opportunities between the two banking groups. Finally, the transaction values Natexis at a substantial discount over its net assets, which should give Banques Populaires some financial flexibility to integrate its new affiliate.
In confirming Natexis Banque's ratings at A2, while changing the outlook on the bank's long-term rating to positive from stable, Moody's noted that its integration into Banques Populaires Group as the specialized subsidiary in corporate banking services, as well as the reorganization of its business lines with other wholesale activities within Banques Populaires, should be made easier by the large majority Banques Populaires now hold in its capital, and, over the longer term, should benefit its creditworthiness.
The following rating was downgraded:
Caisse Centrale des Banques Populaires -- bank financial strength rating at C+ from B.
The following ratings were confirmed:
Caisse Centrale des Banques Populaires – senior long-term obligations at Aa3, subordinated debts at A1 and short-term deposit rating at Prime-1.
Bred Banque Populaire – long-term debt and deposit at Aa3, short-term deposit rating at Prime-1 and financial strength rating at D+.
Banque Mon‚taire et FinanciŠre – long-term debt and deposit at Aa3 and short-term deposit rating at Prime-1.
Banque Populaire Industrielle, Sud de Paris – long-term deposit rating at Aa3 an short-term deposit rating at Prime-1.
Banque Populaire de la R‚gion Economique de Strasbourg – long-term deposit rating at Aa3.
Banque Populaire Bretagne Atlantique – long-term deposit rating at Aa3.
Banque Populaire Toulouse-Pyr‚n‚es – long-term deposit rating at Aa3.
Banque Populaire de Franche-Comt‚ – long-term deposit rating at Aa3.
Banque Populaire du Haut Rhin – long-term deposit rating at Aa3.
Banque Populaire de Lorraine – long-term deposit rating at Aa3.
Banque Populaire de l'Ouest – long-term deposit rating at Aa3.
Banque Populaire de la R‚gion Sud de Paris – long-term deposit rating at Aa3.
Banque Populaire du Nord – long-term deposit rating at Aa3.
Casden - Banque Populaire – long-term deposit rating at Aa3 and short-term deposit rating at Prime-1.
Natexis Banque S.A. – long-term deposit and debt rating at A2, subordinated debt rating at A3, junior subordinated debt rating at Baa1, counterparty rating at A2, short-term deposit rating at Prime-1 and bank financial strength rating at D+.
Natexis S.A. – long-term debt rating guaranteed by Natexis Banque S.A. at A2, subordinated debt rating guaranteed by Natexis Banque S.A. at A3, junior subordinated debt rating guaranteed by Natexis Banque S.A. at Baa1 and counterparty rating at A2.
Interfinance Natexis N.V. (formerly Interfinance Cr‚dit National N.V.) –long-term debt rating jointly guaranteed by Natexis S.A. and Natexis Banque S.A. at A2 and commercial paper jointly guaranteed by Natexis S.A. and Natexis Banque S.A. at Prime-1.
BFCE US Corp. – commercial paper guaranteed by Natexis Banque S.A. at Prime-1.
The ratings of the debt obligations of both Natexis Banque and Natexis S.A. guaranteed by the Republic of France were not under review and are confirmed at Aaa.
Banques Populaires group is a mutual banking institution, whose funding vehicle, Caisse Centrale des Banques Populaires, is based in Paris. The group had consolidated assets at year-end 1997 FRF665 billion (US$113 billion). The Natexis group, headquartered in Paris, had consolidated assets of FRF299 billion (approximately US$51 billion) at year-end 1997.
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