Paris, December 15, 2022 -- Moody's Investors Service ("Moody's") today upgraded SFIL's long-term issuer, senior unsecured debt and deposit ratings to Aa2 from Aa3. The outlook remains stable. SFIL's Baseline Credit Assessment (BCA) and Adjusted BCA of a3 were affirmed, together with the other ratings and assessments, including SFIL's short-term deposit and issuer ratings of Prime-1, its long-term and short-term Counterparty Risk Assessments (CR Assessments) of Aa2(cr) and Prime-1(cr), respectively, and its long-term and short-term Counterparty Risk Ratings (CRRs) of Aa2 and Prime-1, respectively.
A full list of affected ratings can be found at the end of this press release.
RATINGS RATIONALE
The upgrade of the long-term issuer, senior unsecured debt and deposit ratings to Aa2 from Aa3 stems from (1) the affirmation of SFIL's BCA at a3; (2) the application of Moody's Advanced Loss Given Failure (LGF) analysis, which, given the volume of the bank's senior unsecured debt, now results in two notches of uplift from the Adjusted BCA of a3 (compared to one previously); and (3) a government-support uplift of two notches reflecting a very high support probability from its ultimate owner, the Government of France (Aa2 stable).
The affirmation of the a3 BCA reflects the bank's leading position in the French public-sector financing and its low-risk profile given a high asset quality loan book, as well as adequate funding and liquidity. SFIL's very high nominal leverage and moderate profitability are consistent with such low-risk profile and assigned public-service mission. SFIL's new business relies on the distribution network of La Banque Postale (LBP, A2/A2 stable, baa2), which is its commercial partner for public-sector lending.
Moody's considers the probability of government support to be very high for SFIL's deposits and senior unsecured debt, which results in an uplift of two notches. This assumption is based on (1) Caisse des Depots et Consignations' (CDC's) commitment, as the reference shareholder, to support SFIL's solvency and liquidity, which is included in a letter of comfort, that has been communicated to the French supervisor (Autorite de Controle Prudentiel et de Regulation, ACPR); (2) the State's commitment, as the ultimate shareholder, to support SFIL's solvency and liquidity in case of a default of CDC, which is also stated in another letter of comfort, also communicated to the ACPR; and (3) the key role SFIL plays in the financing of the French local authorities and hospitals. Moody's also believes that the 2015 decision to expand its policy mandate to export financing also enhances SFIL's status and importance in the domestic market.
OUTLOOK
The outlook on SFIL's long-term issuer, senior unsecured debt and deposit ratings is stable, in line with the outlook on the Government of France's debt rating.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
SFIL's long-term ratings could be upgraded as a result of an upgrade of the Government of France's debt rating.
SFIL's BCA could be downgraded as a result of worse-than-expected asset performance or weakening capitalization.
SFIL's long-term ratings could also be downgraded in the event of a downgrade of France's sovereign rating.
A lower BCA, or a significant change in the bank's liability structure that would entail a material reduction in the volume of long-term senior unsecured debt, and, hence, an increase in loss-given-failure, would not necessarily lead to a downgrade of SFIL's long-term ratings, given the very high probability of government support assigned to such instruments.
LIST OF AFFECTED RATINGS
Issuer: SFIL
..Upgrades:
....Long-term Bank Deposits, upgraded to Aa2 from Aa3, outlook remains Stable
....Long-term Issuer Ratings, upgraded to Aa2 from Aa3, outlook remains Stable
....Senior Unsecured Regular Bond/Debenture, upgraded to Aa2 from Aa3, outlook remains Stable
....Senior Unsecured Medium-Term Note Program, upgraded to (P)Aa2 from (P)Aa3
..Affirmations:
....Long-term Counterparty Risk Ratings, affirmed Aa2
....Short-term Counterparty Risk Ratings, affirmed P-1
....Short-term Bank Deposits, affirmed P-1
....Short-term Deposit Note/CD Program, affirmed P-1
....Long-term Counterparty Risk Assessment, affirmed Aa2(cr)
....Short-term Counterparty Risk Assessment, affirmed P-1(cr)
....Short-term Issuer Ratings, affirmed P-1
....Baseline Credit Assessment, affirmed a3
....Adjusted Baseline Credit Assessment, affirmed a3
....Commercial Paper, 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.
Please see https://ratings.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 issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.
Roland Auquier
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
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
