Scope Ratings today placed the A long-term ratings of Crédit Agricole SA (CASA) under review for possible upgrade. These ratings were initially assigned in April 2014, with a Positive Outlook. One outcome of the review could be a one-notch upgrade. Placed on review for possible upgrade are also the ratings of CASA’s capital securities: BB+ for Additional Tier 1 (AT1) and BBB+ for Tier 2. The S-1 short-term ratings and their Stable Outlook are not being reviewed.

Scope noted that its analysis underpinning the ratings of CASA encompasses the overall credit fundamentals of the Crédit Agricole Group’s (CA Group) as well as the solid and reliable intragroup support mechanisms.

At the time when the initial ratings to CASA and their Positive Outlook were assigned, Scope highlighted that one element preventing a higher long-term rating was the relative lack of clarity of the intragroup relations and financial links between CASA and the regional banks – the latter being the backbone of CA Group’s large and stable position as one of France’s premier retail banking and financial services networks. In this respect, Scope noted that during the recent 2015 results presentation CASA detailed the modus operandi and the impact of the transfer of its 25% stake in the regional banks. The agency considers that this transaction, expected to close in Q3 2016, should improve intragroup clarity and transparency, as well as accelerate capital build-up for CASA (although for the CA Group the transaction is capital-neutral).

The improvement in group recurring profitability, occurring against the backdrop of slow-moving macroeconomic conditions in France, is another element underpinning Scope’s rating review. For 2015 both CASA and the CA Group showed good results, with an underlying net income Group share improvement YoY of 8.3% and 3.5%, respectively. The strong performance of Specialised Financial Services and Savings Management & Insurance contributed significantly to the positive results. Solvency metrics also improved, with CA Group’s fully loaded CET1 reaching 13.7% and CASA 10.7% – levels which Scope considers as reassuring.

Reviewed for possible upgrade are the following CASA ratings:

• Issuer Credit-Strength Rating (ICSR) of A
• Senior unsecured debt ratings of A
• AT1 securities ratings of BB+
• Tier 2 securities ratings of BBB+
   

The S-1 short-term ratings are not under review.