The rating is based on the consolidated credit fundamentals of the entire BPCE Group. This is the first time Scope rates the French banking group. The ratings reflect the strong improvement in the fundamentals of the group, which was established in 2009 to avoid a full government bail-out of Natixis, the listed subsidiary of both Banque Populaire and Caisses d’Epargne groups. In four years, the most recently created French banking group managed to create a strong culture and proper business standards out of disparate components. At the same time, the ratings also reflect the still improving funding characteristics of the group, which is in part a direct result of its history.

In line with Scope’s bank rating methodology, the ratings on BPCE do not incorporate any additional notches for government support, as the agency considers a potential state-bailout scenario to be increasingly unlikely as European Union banking systems move towards a resolution and recovery framework which includes creditor bailins.

In its research on BPCE Group, Scope highlights (i) the quality of the franchise of the two brands Caisses d’Epargne and Banques Populaires, supported by the de-risked Natixis product engine, as well as (ii) the manner in which BPCE has considerably simplified its dual mutualist-listed structure and aligned the interests of all the group members. This simplified structure avoids friction among them and should create no obstacle to free capital circulation within the group in the case of a major credit event in the future. Scope also points out the important role of Natixis as a product engine for the whole group and its ability to generate revenue synergies by increasing the equipment rate of the two networks in key products such as consumer finance and insurance. This role should continue and even expand in the near future.

The rating agency also noted that the funding characteristics of BPCE Group offer room form improvement, even though they improved considerably since 2009 when the group was created. Also, considering the breadth and scale of both the Banques Populaires and the Caisses d’Epargne networks, their overall profitability remains low versus domestic peers, in particular due to slightly higher costs.

Looking at factors potentially changing the ratings of BPCE, Scope mentions the accelerating momentum of the group’s capital build-up (positive), as well as the impact of deteriorating French economic fundamentals on BPCE, considering the group’s strong exposure to France where 78% of the group’s commitments are located (negative).

Both the rating drivers and the rating-change drivers are detailed in Scope’s research on BPCE which supports the ratings.

The following ratings were assigned:
- Issuer Credit-Strength Rating (ICSR) at A+, with a stable outlook. The ICSR represents a credit opinion on a bank’s ability to meet its contractual financial commitments on a timely basis and in full while remaining a going concern.
- Senior unsecured debt rating at A+, with a stable outlook.

In the near future Scope will rate BPCE’s short-term debt, as well as subordinated securities and capital instruments if warranted.

Scope said that the ratings assigned today to BPCE, as well as to 17 other large European banks, represent the first step in its rating coverage of the banking industry. The ratings assigned to BPCE are (i) based on public information, (ii) not solicited by the issuer and (iii) without issuer participation in the process.

The methodology used for the rating assessment is “Bank Rating Methodology” published in February 2014. The methodology used for the financial-forecast part of the rating analysis is “Forecasting Bank Financials” published in February 2014. These methodologies are available on www.scoperatings.com.