Paris, October 11, 2019 -- Moody's Investors Service ("Moody's") today upgraded
Credit Agricole Bank Polska S.A. (CABP)'s long-term
deposit ratings to A3 from Baa1 and affirmed its short-term deposit
ratings of P-2. The outlook on the long-term deposit
ratings remains stable. The rating agency also upgraded the bank's
standalone Baseline Credit Assessment (BCA) and Adjusted BCA to ba1 and
baa2, from ba2 and baa3, respectively, as well as its
long-term Counterparty Risk (CR) Assessment and Counterparty Risk
Ratings (CRR) to A2(cr) and A2, from A3(cr) and A3, respectively.
Finally Moody's upgraded CABP's short-term CR Assessment
and CRR to P-1(cr) and P-1, from P-2(cr) and
P-2, respectively.
Today's rating action reflects the continued improvement of CABP's
capitalization and resilient profitability despite low interest rates
weighing on net interest margins.
A list of affected ratings can be found at the end of this press release.
RATINGS RATIONALE
- UPGRADE OF BCA REFLECTS CAPITAL STRENGTHENING MEASURES
The upgrade of CABP's BCA to ba1 from ba2 is mainly driven by its
strengthened capitalization over the last years: the bank's
Tier 1 capital increased to 12.5% as of December 2018,
from 10.7% two years earlier. Moody's estimates
that the bank is properly capitalized to support its growth strategy in
consumer finance and small and medium-sized enterprise (SME) and
corporate lending, as outlined by its parent's new 2020-2022
strategic plan. In addition, CABP can also rely on its parent
for any additional capital need, as evidenced by the recent capital
increases entirely subscribed by Credit Agricole S.A. (CASA;
Aa3 stable, baa2), over the last two years.
The upgrade also reflects CABP's resilient, although still
modest, profitability. Since 2015, CABP's return
on assets has constantly been in the range of 0.3-0.6%
(0.44% in 2018) thanks to increasing loan volumes which
allowed the bank to offset the drop of net interest margins, to
4.8% in 2018 from 5.4% in 2015. While
Moody's considers CABP's efficiency to lag its Polish peers
(the bank's cost-to-income ratio was 72% in
2018, weaker than the Polish banks' average of 55%
at the same date), the bank's profitability is expected to
resist to the low interest rate environment thanks to the benign macroeconomic
environment in Poland and CABP's continuing strategy of diversifying its
banking activities from consumer finance to a full range of universal
banking services, with increased focus on SME and corporate lending.
CABP's BCA is also supported by its strong funding and liquidity
profile, which chiefly relies on a strong deposit base (loans amounted
to 95% of deposits in 2018), a comfortable liquidity buffer
(amounting to 23% of tangible banking assets) and the possibility
to access parent funding in case of need.
Finally, Moody's does not have any particular governance concern
for CABP, and does not apply any corporate behaviour adjustment
to the bank. The application of group standards and the close oversight
of the parent over CABP ensure that the bank's activities are in
line with the group's strategy and risk-appetite.
- UPGRADE OF DEPOSIT RATINGS INCORPORATES BENEFITS FROM AFFILIATE
SUPPORT AND LGF
The upgrade of CABP's deposit ratings to A3 follows the upgrade
of the BCA to ba1 and incorporates the benefits from unchanged assumptions
of affiliate support and results from Moody's Advanced Loss Given
Failure (LGF) analysis.
CABP benefits from a high probability of support from its parent CASA,
based on CASA's full ownership and management involvement in CABP,
the close association of CASA's and CABP's brands, resulting in
high reputational risk for CASA, and the low risk that the parent
would dispose CABP, especially in the context of CASA's 2020-2022
strategic plan, where international retail banking (including CABP)
is one of the group's growth drivers. This results in CABP's
Adjusted BCA of baa2, two notches above its ba1 BCA.
Finally, CABP's deposit ratings benefit from a very low loss-given-failure,
due to the sizeable amount of deposits held by the bank, and a low
likelihood of government support, owing to the fact the CABP is
not systemic in Poland and is a subsidiary of a foreign banking group.
This leads to a two-notch uplift for the deposit ratings from the
bank's Adjusted BCA, to A3.
OUTLOOK
The outlook on CABP's long-term deposit ratings is stable,
reflecting Moody's expectations that the bank will keep the current
level of capital despite expected lending growth. Over the next
12-18 months CABP's credit portfolio is expected to continue
to grow, bringing limited additional risks and allowing the bank
to preserve its profitability in a low interest rate environment.
WHAT COULD CHANGE THE RATING UP/DOWN
CABP's BCA could be upgraded subject to further improvements in the solvency
factors of the bank, namely improved asset quality and strengthening
profitability. A greater volume of subordinated instruments implying
higher protection for junior depositors and a lower loss given failure
in resolution, could also lead to an upgrade of the deposit ratings.
Conversely, CABP's BCA could be downgraded in case of a significant
increase in non-performing loans, a substantial deterioration
in the bank's revenues and a decline in the bank's capital adequacy ratios.
A decrease in the volume of subordinated instruments relative to the bank's
total banking assets could also result in a downgrade.
LIST OF AFFECTED RATINGS
Issuer: Credit Agricole Bank Polska S.A.
..Upgrades:
....Long-term Counterparty Risk Ratings,
upgraded to A2 from A3
....Short-term Counterparty Risk Ratings,
upgraded to P-1 from P-2
....Long-term Bank Deposits,
upgraded to A3 from Baa1, outlook remains Stable
....Long-term Counterparty Risk Assessment,
upgraded to A2(cr) from A3(cr)
....Short-term Counterparty Risk Assessment,
upgraded to P-1(cr) from P-2(cr)
....Baseline Credit Assessment, upgraded
to ba1 from ba2
....Adjusted Baseline Credit Assessment,
upgraded to baa2 from baa3
..Affirmations:
....Short-term Bank Deposits,
affirmed P-2
..Outlook Action:
....Outlook Remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
August 2018. 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, 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 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.
Laurent Le Mouel
Vice President - Senior Analyst
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Carola Schuler
MD - Banking
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
