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23 Nov 2009
Outlook negative on C- BFSR and on Baa1 long-term ratings
Paris, November 23, 2009 -- Moody's Investors Service has today downgraded the bank financial strength
rating (BFSR) of Banque PSA Finance (BPF) to C- -- mapping
to a Baseline Credit Assessment (BCA) of Baa1 -- from C and its long-term
debt and deposit ratings to Baa1 from A3, thus concluding the review
for possible downgrade on the ratings initiated on 30 October 2008.
The outlook on the BFSR and on the long-term debt and deposit ratings
is negative. The Prime 2 short-term debt and deposit rating
Moody's downgrade of the BFSR to C- from C was driven by
the rating agency's expectation of weakening profitability as a
combination of subdued new business and lending volumes and a deterioriation
in asset quality. Following the completion of Moody's stress
tests on BPF's assets and earnings, the rating agency regards
BPF's capital levels as adequate within its revised rating category
given the bank's overall risk profile.
Moody's notes that BPF -- which is a wholly owned captive finance
and non-diversified company that supports the sales of Peugeot
S.A. (rated Baa3/negative) -- is reliant on the number
of cars sold by its parent, which has been temporarily boosted by
"scrappage" schemes. The bank may therefore suffer
from a decrease in its lending volumes in the near future, thereby
weakening its profitability. Although BPF increased its penetration
rate (new car financing as a proportion of parent sales) to 27.8%
at the end of H1 2009 from 25.5% at the end of H1 2008,
a potential further increase of the bank's penetration rate may
not be sufficient to offset the decrease in lending volumes expected by
Moody's, given the deteriorating economic environment.
Furthermore, BPF is suffering from the deterioration of its asset
quality -- notably in the retail loan portfolio, its main business
line -- which has in turn resulted in an increase in its provisioning
levels. Non-performing loans stemming from the French and
Spanish retail loan books in particular, which represented 52%
of the total retail loans as at year end 2008, have increased.
However, Moody's acknowledges BPF's high capitalisation
levels (the Tier 1 ratio stood at 11.94% at the end of June
2009), which provide the bank with significant loss absorption capacity.
Moody's also notes the bank's high reliance on wholesale funding
and particularly on capital markets (36% at the end of June 2009),
interbank (35%) and securitisation (19%), a funding
profile that Moody's regards as a rating constraint. Although
BPF has been able to issue debt on the markets since May 2009, the
bank, as a wholesale-funded institution, suffers from
high funding costs and remains highly sensitive to its need for access
to wholesale funding as well as its potentially tighter access to funding
through the European Central Bank.
The negative outlook on BPF's C- BFSR and Baa1 long-term
debt and deposit rating is underpinned by the negative outlook on Peugeot's
ratings. As a wholly owned captive bank, BPF is highly constrained
by its strategic, commercial and financial links to its parent.
Moody's points to the risks facing credit institutions that are
concentrated on a single industry segment, especially given the
current challenging environment of the European automobile sector.
The captive bank's debt and deposit ratings are therefore inherently
linked to Peugeot's performance and ratings. Given the lack
of diversification of the institution coupled with the risk associated
with its wholesale funding profile, Moody's says that the
differential between Peugeot and BPF should not exceed two notches.
Moody's previous rating action on BPF was implemented on 30 October 2008
when the rating agency placed BPF's A3 long-term debt and
deposit ratings and C BFSR on review for possible downgrade and affirmed
the Prime-2 short-term ratings. Moody's subsequently
reiterated the ongoing review of these ratings on 31 July 2009 further
to Peugeot SA's interim results, and again on 30 October 2009
further to Peugeot SA's Q3 results.
The principal methodologies used in rating BPF were Moody's "Bank Financial
Strength Ratings: Global Methodology", published in February
2007, and "Incorporation of Joint-Default Analysis into Moody's
Bank Ratings: A Refined Methodology", published in March 2007,
which are available on www.moodys.com in the Rating Methodologies
sub-directory under the Research & Ratings tab. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
Headquartered in Paris, Banque PSA Finance had total assets of EUR26.092
billion and reported shareholders' equity (including minority interests)
of EUR3.025 billion as of 30 June 2009.
Vice President - Senior Analyst
Financial Institutions Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades Banque PSA Finance's ratings to C-/Baa1
Financial Institutions Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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