Paris, September 21, 2022 -- Moody's Investors Service ("Moody's") today affirmed the Aa3 long-term deposit and issuer ratings of BNP Paribas Personal Finance (BNPP PF). Moody's has also affirmed BNPP PF's P-1 short-term deposit and issuer ratings, its Aa3(cr)/P-1(cr) Counterparty Risk (CR) Assessments as well as its Aa3/P-1 Counterparty Risk Ratings (CRRs). In addition, Moody's affirmed the bank's Baseline Credit Assessment (BCA) of ba1 and the Adjusted BCA of baa1 which incorporates three notches of affiliate support from the firm's ultimate parent BNP Paribas (BNPP, Aa3/Aa3 stable, baa1). The outlook on the long-term deposit and issuer ratings is stable.
RATINGS RATIONALE
BCA and Long-term Ratings
The affirmation of BNPP PF's BCA of ba1 reflects the institution's robust franchise as a specialized consumer finance company with significant market shares, mostly in Europe. BNPP PF consolidates most consumer finance activities of BNPP group in its accounting perimeter such as France, Italy, Spain or the UK, but also is closely involved in the consumer finance activities undertaken by other BNPP subsidiaries, like in Belgium, Germany or North Africa. The BCA takes account of BNPP PF's relatively high risk profile of its loan book compared to its closest peers as well as the average of European retail banks. At the same time, asset risks are in part mitigated by BNPP PF's geographic diversification; its focus on stable European operating environments for growth; and a gradual rebalancing of the products in favour of less risky products such as auto loans. Moody's expects ongoing inflationary pressures will likely increase loan losses, although the increasing proportion of auto loans will moderate downside risks.
The BCA also reflects BNPP's modest profitability, which has been declining over the past five years, partly owing to the very low interest-rate environment in Europe. The pandemic also negatively affected loan production, due to repetitive lockdown measures. In addition, changes in consumer needs have been requiring material investments to transform BNPP PF's infrastructure. Moody's expects that the impact of rising inflationary pressures on the bank's expenses, risk costs and a reduced loan production over the outlook horizon will somewhat offset the positive impact of repricing on revenues.
The BCA also takes account of the strong dependence on BNPP for BNPP PF's funding and liquidity management and factors in the entity's modest capitalization (Common Equity Tier 1 (CET1) ratio is at 10.2% at year-end 2021). Capital is optimized at group level and Moody's expects capital retention to be adapted to BNPP PF's capital needs and support future growth ambitions.
The affirmation of BNPP PF's baa1 Adjusted BCA reflects Moody's assumption of a very high probability of support from BNP Paribas. This is underpinned by (1) BNPP PF's strategic position as the group's operating arm for the group's consumer finance activities, one of the core businesses of BNPP and several of its international subsidiaries; (2) BNPP PF's integration within the group's management, leading to a very high dependence and interlinkages between BNPP and BNPP PF for capital, funding and asset and liability management.
The affirmation of BNPP PF's Aa3 long-term deposit and issuer ratings reflects Moody's view that BNPP PF would be included in the resolution scope of BNPP. BNPP PF's issuer and deposit ratings of Aa3 are therefore based on (1) its baa1 Adjusted BCA; (2) the application of Moody's Advanced Loss Given Failure (LGF) analysis at the level of BNPP, resulting in three notches of uplift from the Adjusted BCA, given the significant volumes of senior debt and junior deposits; and (3) one additional notch of government support uplift, reflecting a moderate probability of government support.
Rating Outlook
The outlook on the long-term deposit and issuer ratings is stable, in line with the outlook on the ratings of BNP Paribas, also capturing Moody's expectation that BNPP PF's standalone credit profile should be resilient to negative effects from inflationary environment on the its asset risks and profitability.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
BNPP PF's BCA could be upgraded as a result of a significantly and sustainably higher profitability or capital, or a material decrease in asset risks. An upgrade of the BCA will likely not result in an upgrade of its issuer and deposit ratings as they will be constrained by BNPP's ratings. BNPP PF's issuer and deposit ratings could be upgraded if BNPP's ratings were to upgraded.
BNPP PF's BCA could be downgraded in the case of a material deterioration in its asset quality, solvency or liquidity and funding support from its parent. A downgrade in the BCA will not necessarily imply a downgrade of its issuer or deposit ratings if we concluded that the support from BNPP would remain very high. Lastly, a downgrade of BNPP's ratings would result in similar action at BNPP PF.
LIST OF AFFECTED RATINGS
..Issuer: BNP Paribas Personal Finance
Affirmations:
....Adjusted Baseline Credit Assessment, Affirmed baa1
....Baseline Credit Assessment, Affirmed ba1
....Long-term Counterparty Risk Assessment, Affirmed Aa3(cr)
....Short-term Counterparty Risk Assessment, Affirmed P-1(cr)
....Long-term Counterparty Risk Ratings, Affirmed Aa3
....Short-term Counterparty Risk Ratings, Affirmed P-1
....Long-term Issuer Rating, Affirmed Aa3, Outlook Remains Stable
....Short-term Issuer Rating, Affirmed P-1
....Long-term Bank Deposit Rating, Affirmed Aa3, Outlook Remains Stable
....Short-term Bank Deposit Rating, Affirmed P-1
Outlook Action:
....Outlook, Remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://ratings.moodys.com/api/rmc-documents/71997. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 issuer/deal page for the respective issuer on https://ratings.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.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.
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Olivier Panis
Senior Vice President
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris, 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Alain Laurin
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris, 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
