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 for the European Investment Bank (long-term foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term foreign-currency issuer ratings: S-1+/Stable) on 16 January 2023.

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

For the updated Annex accompanying this review, click here.

The European Investment Bank’s (EIB) AAA rating reflects the supranational’s ‘excellent’ intrinsic strength, ‘excellent’ financial profile and ‘excellent’ shareholder support. The EIB’s institutional profile is characterised by a proven track record of excellent governance and an irreplaceable mandate from its EU shareholders. In addition to being at the forefront of implementing the European Fund for Strategic Investments and its successor programme InvestEU, it has played a critical role in the EU’s response to the Covid-19 crisis and it is catalysing Europe’s transition to carbon neutrality.

The EIB’s financial profile benefits from its persistent ability to generate and retain capital every year since its inception in 1958, including in 2020-21 during the Covid-19 crisis. The EIB’s excellent asset quality with negligible non-performing loans is driven by its conservative lending policies, high asset protection, and its widely diversified portfolio across geographies, sectors and counterparties. The EIB’s strong liquidity profile is driven by its high, prudently managed liquid assets, excellent market access given its global benchmark issuer status, diversified funding base, and unique access to the liquidity facilities of the ECB. Challenges, which are marginal at the AAA level, relate to its high leverage and relatively moderate liquidity buffers compared to peers.

The EIB’s unaudited H1-2022 financial results confirm a solid financial performance, with broadly stable core earnings of EUR 1.1bn (vs EUR 1.5bn in H1-2021) and excellent asset quality, with impaired loans remaining limited to EUR 2bn (0.5% of loans), increasing slightly from EUR 1.5bn at YE 2021 and arrears falling to about EUR 94m from EUR 119m as of YE 2021. Treasury assets also decreased slightly to EUR 101.0bn, from EUR 105.6bn at YE 2021, but continue to fully cover projected net outflows over the next 12 months.

The EIB Group Operational Plan 2022-2024 points to planned new signature volumes of EUR 64.3bn in 2023 and EUR 68.8bn by 2024, with annual disbursements ranging between EUR 43-55bn. For 2023, the bank’s global borrowing authorisation is set at up to EUR 50bn, markedly below the EUR 70bn approved during the height of the Covid-19 crisis in 2020-21. As of 31 December 2022, annual borrowings stood at EUR 44.3bn out of the announced funding programme of EUR 45bn, below the funding realised in 2021 (EUR 55.3bn) and 2020 (EUR 70.0bn). The EIB is playing a prominent role in supporting Ukraine after the Russian full-scale invasion started in end-February 2022: the Bank has promptly disbursed EUR 668m in March to help the Ukrainian government meet the most urgent financial needs. In addition, it has authorised a second EUR 1.59bn aid-package in July 2022, of which EUR 1.05bn were disbursed by October 2022, to support the reparation of damaged infrastructure and the implementation of urgent energy efficiency measures, together with restarting municipal services. Disbursements under both packages benefit from guarantees from the European Union (AAA/Stable). An additional EUR 4bn were approved in April 2022 to help Ukraine’s neighbouring countries in the EU to provide key social infrastructure and public services to Ukrainian refugees. EUR 2bn have been already allocated to Poland.

Finally, the EIB benefits from highly rated key shareholders. The six largest European economies – Germany (AAA/Stable), France (AA/Stable), Italy (BBB+/Stable), Spain (A-/Stable), the Netherlands (AAA/Stable) and Belgium (AA-/Stable) – together account for around 78% of the EIB’s capital. Their weighted average rating of AA- drives Scope’s excellent assessment of shareholder support, which is further supported by the EIB’s high-quality callable capital of about EUR 135.7bn which as of end-2021 covers around 30% of its outstanding mandated assets.

The Stable Outlook reflects Scope’s assessment of the EIB’s financial buffers to withstand external and balance sheet-driven shocks. The rating could be downgraded if: i) the EIB records sustained losses which reduce the capital base; ii) its liquidity buffers are significantly reduced; and/or iii) highly rated key shareholders are downgraded.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Supranational Rating Methodology, 11 August 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 Alvise Lennkh-Yunus, Executive Director

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