Rating action

Scope Ratings has today affirmed its issuer ratings of AA- to Crédit Foncier de France (CFF) and its covered bond issuing subsidiary, Compagnie de Financement Foncier (CoFF). The Outlooks have been changed to Negative.

The AAA ratings with a Stable Outlook on the covered bonds issued by CoFF remain unchanged.

Rating rationale

The ratings on CFF and CoFF (100% owned by CFF) reflect the credit quality of CFF’s parent, BPCE SA (BPCE). CFF and CoFF have the status of affiliates within the group and therefore benefit from the intra-group solidarity mechanism established by French law. In Scope’s opinion, Groupe BPCE has a traditionally low-risk core business model and supportive prudential metrics but faces pressure to improve its structural efficiency and profitability.

Ultimately, the strength of the protective intra-group solidarity mechanism is sensitive to the group’s ability to improve profitability metrics going forward. The Negative Outlook reflects the possibility that the strength of this mechanism could weaken over time.

The AAA ratings with a Stable Outlook on the covered bonds issued by CFF remain unchanged.

The key drivers of the ratings on CFF and CoFF, in decreasing order of importance, are:

• CFF and CoFF benefit from the strong internal solidarity system within Groupe BPCE. Any change in the credit quality of BPCE would entail a similar rating impact for CFF and CoFF.
   
• CFF and CoFF’s weight within Groupe BPCE is likely to decrease over time following the redeployment of some of Crédit Foncier's activities across Groupe BPCE. However, CoFF continues to operate as a refinancing tool for the group and remains a strategically important issuer of covered bonds for the whole group.
   
• Risk management is strongly aligned to that of Groupe BPCE, and bondholders benefit from the group’s strong risk control culture.

Rating-change drivers

Rating-change drivers include:

Negative rating-change drivers:

• The rating is based on the positions of CFF and CoFF as affiliates of Groupe BPCE, and thus the benefit of the strong internal guarantee and solidarity system within the group. However, the parent’s credit quality could have less of an impact on the affiliates’ ratings if its commitment to its associates or ability to provide support becomes weaker.

Positive change drivers include:

• Any positive change to the credit quality of the parent group may strengthen the solidarity mechanism and benefit its affiliates.

Stress testing & cash flow analysis
No stress testing was performed. No cash flow analysis was performed.

Methodology
The methodology used for these ratings and rating outlooks (Bank Rating Methodology, 4 May 2020) is available on https://www.scoperatings.com/#!methodology/list.
Information on the meaning of each rating category, including definitions of default and recoveries can be viewed in the “Rating Definitions - Credit Ratings and Ancillary Services” published on https://www.scoperatings.com/#!governance-and-policies/rating-scale. Historical default rates of the entities rated by Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA. Please also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s definitions of default and rating notations can be found at https://www.scoperatings.com/#governance-and-policies/rating-scale. Guidance and information on how Environmental, Social or Governance factors (ESG factor) are incorporated into the rating can be found in the respective sections of the methodologies or guidance documents provided on https://www.scoperatings.com/#!methodology/list.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The rated entity and/or its agents participated in the rating process.
The following substantially material sources of information were used to prepare the credit rating: public domain, the rated entity, and Scope internal sources.
Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the rating or outlook action, the rated entity was given the opportunity to review the rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the rating was not amended before being issued.

Regulatory disclosures
This credit rating and rating outlook is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Nicolas Hardy, Executive Director
Person responsible for approval of the rating: Dierk Brandenburg, Managing Director
The ratings/outlooks were first released by Scope on 7 February 2017. The ratings/outlooks were last updated on 2 July 2018. 

Potential conflicts 
Please see www.scoperatings.com for a list of potential conflicts of interest related to the issuance of credit ratings. 

Conditions of use / exclusion of liability
© 2020 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.
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