Ratings of Natixis and Banque Palatine also affirmed
London, 16 May 2014 -- Moody's Investors Service has today affirmed the A2 long-term
supported ratings of BPCE, the central institution and main issuing
entity of Groupe BPCE (unrated) which continues to incorporate our unchanged
assessment of group support (reflected in an adjusted baseline credit
assessment (BCA) of baa2) as well as systemic support. Concurrently,
BPCE's D bank financial strength rating (BFSR), mapping into
a BCA of ba2 was affirmed at the current level. The firm's
Prime-1 short-term ratings were also affirmed. The
rating action reflects Moody's view that the risk and business profiles
of BPCE, and of the whole Groupe BPCE -- from which
its long-term ratings are ultimately derived -- remain
compatible with current rating levels.
Concurrently, Moody's affirmed the A2 long-term debt
and deposit ratings as well as the Prime-1 ratings of two of BPCE's
subsidiaries, Natixis and Banque Palatine. Their respective
BFSRs of D (mapping into a BCA of ba2) and D+ (mapping into a BCA
of baa3) were also affirmed. In addition, Moody's affirmed
the ratings of the subordinated, junior subordinated and capital
instruments issued and/or backed by BPCE and Natixis, as these ratings
are derived from their baa2 adjusted BCA, which incorporate our
unchanged assessment of the group's ability and willingness to provide
support in case of need.
The outlook on the BFSRs of BPCE and Natixis is stable whereas the outlook
on the BFSR of Banque Palatine was changed to negative from stable.
The outlook is stable on all supported ratings of BPCE, Natixis
and Banque Palatine.
Please click on this link (http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_170749)
for the List of Affected Credit Ratings. This list is an integral
part of this press release and identifies each affected issuer.
RATINGS RATIONALE
-- UNCHANGED ADJUSTED STANDALONE CREDIT ASSESSMENTS FOR
BPCE AND ITS SUBSIDIARIES
The mutualist Groupe BPCE itself is not a legal entity and it is thus
not rated. Its main issuing vehicle is the central institution
BPCE, which, together with the other entities included within
the group solidarity mechanism - that is embedded in the French
banking law - benefits from the creditworthiness of the whole group.
This arrangement translates into a baa2 adjusted BCA for BPCE and its
main subsidiaries.
Moody's decision for an unchanged adjusted BCA for BPCE and its
subsidiaries at baa2 reflects different factors. Whilst Moody's
recognises material progress towards its integration since the group was
set up in 2009, it believes that it will take more time for Groupe
BPCE to become a truly fully-integrated group and benefit from
the associated benefits and synergies. This is evidenced by the
current overall group profitability and operational efficiency levels,
which are sub-par and behind those of its domestic peers.
The key rating constraint for Groupe BPCE remains its liquidity/funding
position. Albeit on an improving trend since 2011, the group
still has a sizeable stock of short-term and long-term confidence-sensitive
wholesale funding. This continues to pose refinancing risk,
which is only partly mitigated by its liquidity buffer, whose quality
Moody's considers to be lower than that of its domestic and European
peers because it includes a large portion of assets that can be pledged
with central banks but that are non-marketable.
Groupe BPCE has also demonstrated good resilience to the still uncertain
economic environment in France and the rest of Europe in recent quarters,
as evidenced by robust asset quality metrics. Nevertheless,
Moody's continues to believe that its asset quality profile remains
under pressure, given the weak economic growth prospects for France
and the rest of Europe over the next 12-18 months.
--STANDALONE CREDIT ASSESSMENT OF BPCE
The affirmation of BPCE's D BFSR (mapping into a BCA of ba2) with
stable outlook reflects Moody's view that the bank's risk
and business profiles remain compatible with its current rating levels.
As the central institution and main issuing entity of the group,
BPCE mainly consolidates Natixis, Banque Palatine, Crédit
Foncier de France (A2 stable; E+stable/b1) and Locindus S.A.
(A2 stable/ba3). Crédit Foncier de France and Locindus S.A.
were excluded from today's rating action.
BPCE's ba2 BCA standalone credit assessment reflects its (1) relatively
narrow earnings base, resulting from the consolidation of the main
group's subsidiaries which, however, does not include
the retail and commercial banking operations of the group that are undertaken
through its two networks of regional banks (Banques Populaires and Caisses
d'Epargne); (2) most-entirely wholesale funding profile,
due to its role as the main debt issuing entity for the whole Groupe BPCE,
which constrains its standalone credit assessment because of the confidence-sensitive
nature of market funding; and (3) its adequate capitalisation.
The firm's BCA continues to factor-in the challenges that
BPCE -- through its consolidated subsidiaries --
will continue to face in the coming quarters due to a still uncertain
economic outlook in France, to which it is most exposed.
--STANDALONE CREDIT ASSESSMENT OF NATIXIS
The affirmation of Natixis's D BFSR (mapping into a ba2 BCA) with
a stable outlook reflects Moody's view that, despite its wide
array of activities and the ongoing deleveraging of its legacy asset portfolio,
the bank's credit fundamentals continue to be compatible with the
current level. This points to the bank's vulnerability to
challenging economic conditions in France and the rest of Europe,
where it mainly operates. Moody's expects the bank's
asset quality, which deteriorated materially during 2012 and 2013,
to remain under pressure in the coming quarters.
Natixis has an established franchise in corporate lending, asset
management and other selected activities both in France and internationally
and its business mix covers a wide range of activities. Some of
these activities generate stable and predictable income, and,
for this reason, its overall earnings are less volatile than more
traditional corporate and investment banks. In addition,
the BCA takes into account the efforts being deployed to leverage cross-selling
opportunities with the rest of the group. However, in Moody's
view, the bank continues to face some challenges in relation to
the transition to an 'originate-to-distribute'
business model, which the bank has been undertaking to reduce capital
and funding consumption.
Despite the ongoing reduction of its legacy asset portfolio, which
management expects to wind-down by end-June 2014,
Natixis's risk profile continues to be negatively affected by certain
capital markets activities, which are inherently risky. As
part of the 2014-17 strategic plan, the bank's management
has announced the expansion of some of these activities internationally.
Moody's believes that although they are limited in scope,
these activities could increase the bank's risk profile, if
not adequately controlled.
Natixis's ba2 BCA is also constrained by its large reliance on confidence-sensitive
market funding, both short and long term.
--STANDALONE CREDIT ASSESSMENT OF BANQUE PALATINE
The affirmation of Banque Palatine's D+ BFSR (mapping into
a BCA of baa3) adequately reflects the bank's risk and business
profiles in Moody's opinion. Banque Palatine remains particularly
vulnerable to the current uncertain operating environment in France,
to which it is exposed as a result of its business focus to large SMEs.
This is evidenced by deteriorating asset quality and profitability metrics
in recent quarters; Moody's does not expect this trend to reverse
over the next 12-18 months. This is also augmented by its
high single-borrower concentration risk.
In Moody's view, asset quality risks are partly mitigated
by a relatively good liquidity/funding position. With a loan-to-deposit
ratio lower than 100% at end-2013, the bank is the
only rated entity of Groupe BPCE that is not structurally reliant on wholesale
funding. The firm's BCA is also commensurate with the relatively
high level of single-borrower concentration risk against an adequate
capitalisation level, but will remain under pressure in the current
operating environment, in which its earnings generation capacity
is constrained. For this reason, the outlook on its BFSR
was changed to negative from stable.
--LONG-TERM RATINGS OF BPCE, NATIXIS AND BANQUE
PALATINE
The affirmation of the A2 long-term supported ratings for BPCE,
Natixis and Banque Palatine follows the affirmation of their BFSRs and
Moody's unchanged support assumptions. The long-term
ratings for these three institutions incorporate three notches of cooperative
support, leading to an adjusted BCA of baa2 and a further three
notches of systemic support, reflecting the high probability of
government support for large, systemically important banking groups
in France.
The ratings for the subordinated, junior subordinated and capital
instruments issued and/or backed by BPCE and Natixis were also affirmed
at their current levels. These ratings are notched-off from
the adjusted BCA of baa2, which incorporate the credit strength
of whole Groupe BPCE and is reflected in a three-notch uplift from
the standalone credit assessments of these two entities.
RATIONALE FOR OUTLOOKS
The stable outlook on the BFSRs of BPCE and Natixis as well as the long-term
ratings of BPCE, Natixis and Banque Palatine, reflects Moody's
view that the currently foreseen risks to creditors, particularly
those resulting from a still challenging economic outlook in France are
already incorporated in the ratings. Nevertheless, negative
rating momentum could develop if operating conditions deteriorate beyond
current expectations.
The change in outlook to negative from stable on the BFSR of Banque Palatine
reflects additional profitability and asset quality pressure that this
firm is facing in the current challenging operating environment.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Rating upgrades are unlikely in the short-term, as indicated
by the stable outlook on all long-term ratings. However,
some upwards ratings pressure could develop if Groupe BPCE as a whole
improves its credit profile, which could in turn translate into
a higher adjusted BCA for BPCE, Natixis and Banque Palatine.
Higher standalone credit assessments for BPCE and Natixis, whose
BFSRs have a stable outlook, could be achieved by these institutions
if they demonstrate a significant improvement in their credit rating drivers,
particularly liquidity, asset quality, profitability and efficiency.
The negative outlook on Banque Palatine's BFSR indicates that an
upgrade is unlikely over the next 12-18 months. However,
some positive pressure on its standalone credit assessment could materialise
if the bank were to improve its deteriorating asset quality profile and/or
its profitability and capitalisation. A reduction in single-borrower
concentration risk could also be positive for the ratings.
Downgrade pressure could develop on the ratings for BPCE, Natixis
and Banque Palatine as a result of higher than expected deterioration
in the credit fundamentals of these three firms, a weakening credit
standing of the whole Groupe BPCE and/or in the event of a multi-notch
downgrade of the rating of the Government of France. In addition,
a downward revision of Moody's current assumptions of systemic support
-- which may arise in the context of the new Bank Recovery
and Resolution Directive -- could also have negative implications
for the A2 long-term ratings.
The principal methodology used in these rating was Global Banks published
in May 2013. Please see the Credit Policy 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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
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.
Andrea Usai
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's affirms BPCE's A2 long-term supported ratings; stable outlook
