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Rating Action:

MOODY'S LOWERS CREDIT AGRICOLE'S RATINGS TO Aa2/B+, UPGRADES CREDIT LYONNAIS TO Aa3 AND CONFIRMS ITS B- FINANCIAL STRENGTH RATING; ALL RATINGS HAVE A STABLE OUTLOOK

22 May 2003
MOODY'S LOWERS CREDIT AGRICOLE'S RATINGS TO Aa2/B+, UPGRADES CREDIT LYONNAIS TO Aa3 AND CONFIRMS ITS B- FINANCIAL STRENGTH RATING; ALL RATINGS HAVE A STABLE OUTLOOK

Approximately $13.5 Billion of Debt Securities Affected.

Paris, May 22, 2003 -- Paris, May 22, 2003 -- Moody's Investors Service lowered to Aa2/B+ from Aal/A- the senior long-term debt and financial strength ratings of Credit Agricole S.A.. At the same time, the long-term debt rating of Credit Lyonnais was raised to Aa3 from A1 while its financial strength rating was confirmed at B-. Moody's also lowered to Aa3 from Aa2 the long-term debt and deposit ratings of Credit Agricole Indosuez (CAI) and confirmed its C financial strength rating. The Prime-1 short-term debt ratings of the three institutions were confirmed. All ratings now have a stable outlook.

Moody's said that its decision reflected its expectation that, after having cleared all regulatory hurdles, Credit Agricole's tender offer will come through successfully. The offer was officially launched on March 28th 2003 following the Commission des Operations de Bourse (COB)'s clearance, and will close on May 26th, after a ruling from the French State Court has upheld the decision of the banking regulators to approve the transaction. Although the results of the tender offer should only be announced on June 6th, Moody's said that it expects the transaction to be successfully completed and Credit Agricole to gain a majority in Credit Lyonnais, in light of its current 17.8% stake in the bank and the commitment from Credit Lyonnais's group of core shareholders to tender their shares (representing 26.6% of the capital in total) to Credit Agricole.

Moody's commented that Credit Agricole's Aa2/B+ ratings reflect the strengths of the banking group arising from the merger, including its dominant domestic retail franchise, the enhanced depth and diversity of its various business lines and the synergies expected from the combination. At the same time, Credit Agricole's lower rating also considers the material integration challenges and execution risks involved in the combination and realignment of the two banks various activities, given the size, complexity as well as different banking culture and organization of the combined group.

Moody's also pointed to Credit Agricole's somewhat reduced financial flexibility and to some capital dilution as the price paid for Credit Lyonnais - largely in cash - incorporates significant goodwill, in spite of the group's traditional strong internal capital generation capacity. Credit Agricole's profitability indicators are also likely to reflect the fact that synergies expected from the acquisition will filter through to earnings only gradually, as they may be constrained by social and operational rigidities.

The upgrade of Credit Lyonnais's long-term debt rating to Aa3 reflects the benefit of its integration into a financially stronger organization and related credit support. Similarly, CA Indosuez Aa3 rating - also lowered from Aa2 - continues to be underpinned by its status as one of Credit Agricole's key subsidiary. Moody's noted that the transaction should have long-term positive implications for both entities - as well as for Credit Agricole global financial strength - by strengthening their fundamentals over the medium term if the merger strategy is successfully implemented and if the synergies opportunities which are envisaged do indeed come to fruition. In particular, the combination of their wholesale banking activities should achieve greater critical mass and earnings stability, while reducing costs and total allocated capital. However, the confirmation with a stable outlook of both CAI's and Credit Lyonnais's financial strength ratings at C and B-, respectively, reflects the fact that uncertainties exist with regard to the extent and timing of the realization of the expected synergies, as well as of potential changes in the legal and operational framework of the combined group.

Finally, Moody's said that the stable outlook on Credit Agricole's ratings reflected both the long-term strategic benefits resulting from Credit Lyonnais's acquisition which somewhat temper the related execution risks, and the fact it continues to view Credit Agricole as one of the strongest providers of mass retail financial services in Europe.

The following ratings were lowered:

Credit Agricole S.A. - senior debt and long-term bank deposit to Aa2 from Aa1, subordinated debt to Aa3 from Aa2, financial strength to B+ from A-;

Credit Agricole Indosuez - senior debt and long-term bank deposit to Aa3 from Aa2, subordinated debt to A1 from Aa3;

Indosuez Holdings S.C.A. - preferred stock to A2 from A1;

Twenty Caisses Regionales de Credit Agricole - long-term bank deposit to Aa2 from Aa1.

The following ratings were upgraded:

Credit Lyonnais S.A. - senior debt and long-term bank deposit to Aa3 from A1, subordinated and junior subordinated debt to A1 from A2;

Credit Lyonnais S.A., New York branch - senior debt to Aa3 from A1 and subordinated debt rating to A1 from A2;

Credit Lyonnais Capital S.C.A. - preferred stock guaranteed by Credit Lyonnais S.A. to A2 from A3;

Credit Lyonnais Finance (Guernsey) Ltd. - senior debt guaranteed by Credit Lyonnais S.A. to Aa3 from A1, subordinated and junior subordinated debt guaranteed by Credit Lyonnais S.A. to A1 from A2;

Credit Lyonnais Financial Products (Guernsey) Ltd. - senior debt guaranteed by Credit Lyonnais S.A. to Aa3 from A1, subordinated and junior subordinated debt guaranteed by Credit Lyonnais S.A. to A1 from A2.

The following ratings were confirmed:

Credit Agricole S.A. - short-term debt and bank deposit at Prime-1;

Credit Agricole Indosuez - short-term bank deposit at Prime-1 and bank financial strength at C;

Indosuez North America - commercial paper guaranteed by Credit Agricole Indosuez at Prime-1;

Twenty Caisses Regionales de Credit Agricole - short-term bank deposit at Prime-1;

Credit Lyonnais S.A. - short-term debt and bank deposit at Prime-1 and bank financial strength at B-;

Credit Lyonnais S.A., New York branch - short-term debt at Prime-1;

Credit Lyonnais Finance (Guernsey) Ltd. - short-term debt guaranteed by Credit Lyonnais S.A. at Prime-1;

Credit Lyonnais Financial Products (Guernsey) Ltd. - short-term debt guaranteed by Credit Lyonnais S.A. at Prime-1;

Credit Lyonnais North America, Inc. - commercial paper guaranteed by Credit Lyonnais S.A. at Prime-1.

Based in Paris, Credit Agricole S.A. is the central entity of the Credit Agricole mutual banking group. At end-2002, the group had total assets EUR 581 billion. Also headquartered in Paris, Credit Lyonnais S.A. had consolidated assets of EUR 245 billion at end-2002.

London
Samuel S. Theodore
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
44 20 7772 5454

Paris
Jean-Luc Lepreux
Senior Vice President
Financial Institutions Group
Moody's France S.A.
33 1 53 30 10 20

No Related Data.
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