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Rating Action:

Moody's affirms all ratings of FCA Bank and assigns Prime-2 rating to new Euro Commercial Paper Programme

07 Mar 2018

Standalone baseline credit assessment upgraded to ba1 from ba2

London, 07 March 2018 -- Moody's Investors Service (Moody's) today upgraded the standalone Baseline Credit Assessment (BCA) of FCA Bank S.p.A. (FCA Bank) to ba1 from ba2, affirmed the bank's baa3 adjusted BCA, and affirmed the bank's A3/Prime-2 deposit ratings and Baa1 long-term issuer rating. The outlook on the long-term deposit rating remains negative, whilst the outlook on the long-term issuer rating remains stable. At the same time, the rating agency assigned a first-time rating of Prime-2 to the Euro Commercial Paper (ECP) programme of FCA Bank S.p.A., Irish branch. A full list of affected ratings is available at the end of this press release.

RATINGS RATIONALE

-- UPGRADE OF CAR MANUFACTURER FIAT CHRYSLER AUTOMOBILES N.V. DRIVES UPGRADE OF FCA BANK'S STANDALONE BCA

Moody's said that the upgrade of FCA Bank's standalone BCA to ba1 from ba2 reflects the upgrade of the Corporate Family Rating (CFR) of Fiat Chrysler Automobiles N.V. (FCA) to Ba2 from Ba3 as indicated in the rating agency's press release dated 6 March 2018 "Moody's upgraded FCA to Ba2; stable outlook", available at https://www.moodys.com/research/--PR_380246.

Even though FCA Bank offers financing services to car manufacturers other than FCA, the bank still has a very high commercial dependence on the car manufacturer's activities; in line with the rating agency's approach to other auto finance companies, Moody's limits FCA Bank's standalone BCA to no more than one notch above FCA's CFR. The upgrade of FCA's CFR removes this constraint on FCA Bank's standalone BCA.

The ba1 standalone BCA of FCA Bank reflects the bank's low stock of problem loans, sound capital, and good profitability, while also signalling the risks stemming from FCA Bank's monoline business model, high loan growth, and its wholesale funding profile.

-- ALL OTHER RATINGS AND ASSESSMENTS WERE AFFIRMED

Despite the upgrade of the bank's standalone BCA, all ratings were affirmed.

The affirmation of all ratings and assessments of FCA Bank reflects Moody's unchanged assumptions regarding the bank's probability of affiliate support, loss-given-failure for deposits and senior debt, and government support.

Moody's continues to assess the probability of support from Credit Agricole S.A. (adjusted BCA baa1) as high, reflecting its 50% shareholding in FCA Bank, substantial exposure in terms of funding, and broader reputational risk were it to allow FCA Bank to fail. This together with higher standalone BCA results in an unchanged adjusted BCA of baa3.

The outcome of Moody's advanced Loss Given Failure (LGF) analysis is likewise unchanged. The bank's substantial volume of senior debt supports extremely low loss-given-failure for deposits, and very low loss-given-failure for senior debt, resulting in a three-notch uplift for deposits and a two-notch uplift for senior debt from the baa3 adjusted BCA.

Moody's continues to assume low probability of government support for FCA Bank, given its relatively small size and lack of systemic importance. As a result, there is no related uplift in the deposit and senior debt ratings.

-- OUTLOOK ON LONG-TERM DEPOSIT RATING REMAINS NEGATIVE, OUTLOOK ON ISSUER RATING REMAINS STABLE

Moody's said that the outlook on FCA Bank's A3 long-term deposit rating remains negative, reflecting the negative outlook on the Italian government's Baa2 ratings. In accordance with Moody's methodology, bank ratings do not typically exceed the related sovereign bond rating by more than two notches, reflecting the agency's view that the expected loss of rated bank instruments is unlikely to be significantly below that of the sovereign's own debt.

The outlook on FCA Bank's Baa1 issuer rating remains stable, reflecting Moody's expectation that the credit profile of the bank will remain resilient over the next 12-18 months, and that the volume and subordination of senior unsecured debt will remain broadly in line with the rating agency's current loss-given-failure assumptions.

-- ECP PROGRAMME RATING ASSIGNED AT PRIME-2

Moody's said it assigned a Prime-2 short-term rating to FCA Bank's new Euro Commercial Paper (ECP) programme, which will allow the bank to issue up to EUR750 million of ECP via its Irish branch. The rating of FCA Bank's ECP programme reflects the bank's Baa1 issuer rating and is consistent with the standard linkages between long-term and short-term ratings used by Moody's.

FACTORS THAT COULD LEAD TO AN UPGRADE

FCA Bank's ba1 BCA is currently constrained by FCA's Corporate Family Rating of Ba2. The baa3 adjusted BCA could be upgraded following an increase in Moody's expectation of the probability of support from Credit Agricole S.A., or an upgrade of Credit Agricole S.A.'s adjusted BCA.

FCA Bank's A3 deposit rating is constrained to two notches above Italy's sovereign bond rating of Baa2, which has a negative outlook; a stabilisation or an upgrade of Italy's Baa2 sovereign debt rating would lead to a stabilisation of FCA Bank's A3 long-term deposit rating. The bank's Baa1 issuer rating could be upgraded following an upgrade of FCA Bank's adjusted BCA, or a material increase in the stock of subordinated debt, which would enhance the protection available to senior creditors.

FACTORS THAT COULD LEAD TO A DOWNGRADE

A downgrade of FCA would likely lead to a downgrade of FCA Bank's BCA given the inherent links between the two entities; FCA Bank's deposit and issuer ratings could be downgraded following a downgrade of Italy's sovereign ratings, a reduced probability of support from Credit Agricole S.A., or a downgrade of Credit Agricole S.A.'s adjusted BCA.

LIST OF AFFECTED RATINGS

Issuer: FCA Bank S.p.A.

..Upgrades:

....Baseline Credit Assessment, upgraded to ba1 from ba2

..Affirmations:

....Adjusted Baseline Credit Assessment, affirmed baa3

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

....Long-term Counterparty Risk Assessment, affirmed Baa1(cr)

....Long-term Issuer Rating, affirmed Baa1 Stable

....Short-term Bank Deposits, affirmed P-2

....Long-term Bank Deposits, affirmed A3 Negative

..Outlook Actions:

....Outlook remains Negative(m)

Issuer: FCA Bank S.p.A, Irish Branch

..Assignments:

.... Commercial Paper, assigned P-2

..Affirmations:

....Senior Unsecured Regular Bond/Debenture, affirmed Baa1 Stable

....Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1

..Outlook Action:

....Outlook remains Stable

Issuer: FCA CAPITAL IRELAND P.L.C.

..Affirmations:

....Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1 Stable

..No Outlook assigned

Issuer: FCA Capital Suisse SA

..Affirmations:

....Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1 Stable

..Outlook Action:

....Outlook remains Stable

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks published in September 2017. 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.

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.

Edoardo Calandro
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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