Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review on FCA Bank on 8 September 2022.

The following ratings were reviewed:

• Issuer rating of A/Positive
   
• Senior unsecured debt rating of A/Positive

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

The A issuer credit rating on FCA Bank reflects the following rating considerations:

• FCAB has entered a period of significant change as the bank’s shareholders, Crédit Agricole and Stellantis, have announced the termination of their long-standing joint venture and the purchase by Crédit Agricole of Stellantis’ stake in the issuer. Following the completion of the transaction, FCAB will be a wholly owned subsidiary of the Crédit Agricole group.We therefore expect the credit profile of FCAB will be more closely aligned to that of Crédit Agricole. However, as the deal is only expected to be completed in 2023, Scope still considers the current rating level appropriate.
   
• FCAB is one of the Europe’s largest car-finance providers, operating in 17 European countries as well as in Morocco, primarily serving the brands of the Stellantis group. Under the announced terms, the bank’s perimeter is set to shrink significantly. The non-banking activities of FCAB subsidiary Leasys (excluding Leasys Rent) will be transferred to a new joint venture between Stellantis and Crédit Agricole, and new origination will suffer from the termination of the partnership with the Stellantis group. The bank will continue to finance cars in the retail market as well as independent dealers. Scope expects FCAB to develop a strategy centred around the consolidation of current white-label agreements, the pursuit of new partnerships and the expansion of the rental and mobility business through Leasys Rent.
   
• FCAB’s upcoming shift in business model, from being a captive of the Stellantis group to an independent finance provider within the Crédit Agricole group, will afford the bank higher strategic freedom and could be a powerful catalyst for a faster transition to a more environmentally friendly business given Crédit Agricole’s focus on environmental, social and governance issues. (ESG factor)
   
• Financial performance has proved resilient, with the double-digit return on equity driven by high cost-efficiency and low cost of risk. FCAB has comfortable headroom above its minimum capital requirements and access to diversified funding sources.

FCAB’s issuer rating is two notches above the rating of the Republic of Italy (BBB+/Stable). In accordance with Scope’s bank rating methodology, no mechanistic caps are applied based on the sovereign rating, although sovereign risk is considered for each issuer. In FCAB’s case, the correlation between the bank and the sovereign is low due to FCAB’s geographic diversification and lack of exposure to Italian sovereign bonds.

One or more key drivers of the credit rating action are considered an ESG

Outlook – rating-change drivers

Scope’s Positive Outlook indicates that the risks to the current rating level are skewed to the upside

What could move the credit rating up:

The completion of the announced transaction as planned (which Scope considers likely), resulting in a higher integration of the bank into the Crédit Agricole group, could have positive rating implications, even with the likely decline in business perimeter and volumes.

What could move the credit rating down:

A failure to complete the transaction and/or evidence of lower commitment from Crédit Agricole would increase strategic uncertainty as to the bank’s future and could lead to a credit rating downgrade.

Overview of FCA Bank’s rating construct

Operating environment: supportive

Business model: consistent

Initial mapping refinement: high

Initial mapping: bbb/bbb+

Long-term sustainability (ESG-D): developing

Adjusted anchor: bbb

Earnings capacity and risk exposures: supportive

Financial viability management: comfortable

Additional factors: neutral factor

Standalone rating: a-

External support: subsidiary, less integrated

Approach: bottom-up

Support notches: 1

Long-term issuer rating: A

The methodologies applicable for the reviewed ratings and rating Outlooks (Financial Institutions Rating Methodology, 28 January 2022) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Nicolas Hardy, Executive Director

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