The rating is based on the consolidated credit fundamentals of the entire Crédit Mutuel Group. This is the first time Scope rates the French banking group. The ratings are based on the very strong domestic retail-bank franchise of Crédit Mutuel, as well as on the characteristics of its low-risk balance sheet. Scope also cited as a rating driver the less clear governance of Crédit Mutuel and the geographical divide within the consolidated group.

In line with Scope’s bank rating methodology, the ratings on Crédit Mutuel 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.

Scope’s rating research highlights the characteristics of Crédit Mutuel’s business model, pointing to (i) the strength of the retail and commercial banking franchises of the different brands of the group in France; (ii) the strong bancassurance franchise (both life and non-life); and (iii) the group’s longstanding focus on technology – both electronic and digital banking and electronic payments.

The agency also mentioned that Crédit Mutuel displays very strong capital and leverage indicators – among the highest in French banking at end-2013 – with a CRD-4 CET1 ratio of 14.2% and a leverage ratio of 5.6%. Even if perfectible, group liquidity has also improved over the last years. Another positive factor is the group’s smart acquisition strategy in recent years (focused impact and low cost).

Referring to the topic of group structure and governance, Scope noted that the relatively loose structure, with a relative geographical divide between large group member banks, has led to the duplication of entities operating in the same business line but in different regions of the country. In this context, Scope added that as a result of the decentralized organization the risk exists of potential regional frictions with regard to the intragroup cash circulation.

As a negative rating-change driver for the group as a whole, Scope cited the scenario, arguably remote, of Crédit Mutuel Arkea leaving the group if the geographical divide deepened further. Further consolidation and better operational integration within the group is a positive rating-change driver.

Both the rating drivers and the rating-change drivers are detailed in Scope’s research on Crédit Mutuel 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 Crédit Mutuel’s short-term debt, as well as subordinated securities and capital instruments if warranted.

Scope said that the ratings assigned today to Crédit Mutuel, 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 Crédit Mutuel 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.