Rating action

Scope Ratings GmbH (Scope) has today upgraded its issuer rating on CA Auto Bank (CAAB, formerly FCA Bank) to A+ from A and revised the Outlook to Stable from Positive. Scope has also upgraded the unsecured debt rating to A+ from A and revised the Outlook to Stable from Positive.

Rating rationale

The upgrade of the ratings and the revision of the Outlooks to Stable reflect Scope’s view on CAAB’s closer integration within Crédit Agricole Group and hence the higher likelihood of group support.

Following the announcement made on 4 April 2023 by Crédit Agricole Consumer Finance, a fully owned subsidiary of Crédit Agricole SA, that is has acquired the remaining 50% ownership in CA Auto Bank, hence controlling 100% of CAAB’s capital, and intends to position CAAB as an independent pan-European leader in multi-brand automotive financing backed by the Crédit Agricole Group, Scope now applies a top-down rating approach and believes that CAAB is likely to benefit from high support from the ultimate parent company.

CAAB’s activities are of high strategic importance and in line with the group’s strategic direction. CAAB is largely integrated with the group from an operational standpoint. The financial, reputational and strategic downside from a no-support decision could be material. The recent change of the bank’s legal name also illustrates its long-term strategic alignment.

The bank’s balance sheet is due to decline markedly. Loan production under the partnership agreement with Stellantis (and relating to the former FCA Brands) has continued until the change of ownership. The maturity profile of outstanding customer loans is relatively short. Scope estimates that about a third are maturing within a year. CAAB wants to develop new partnerships over time and continue to grow its portfolios. Competition in this field has increased across Europe.

Of note, Scope does not apply a mechanical cap to CAAB’s issuer rating in relation to the agency’s sovereign rating on Italy, the bank’s country of domicile. In addition to the high degree of group integration mentioned above, the parent company and the subsidiary are both domiciled in the eurozone and are both under direct supervision of the European Central Bank. Scope expects group support to be forthcoming.

Outlook and rating-change drivers

The Outlook is Stable and mirrors the Outlook on Crédit Agricole SA, CAAB’s ultimate parent.

Scope would upgrade the rating in the case of:

• An even closer group integration, hence higher expectation of support, which could stem from a successful execution of the strategy to create a viable independent multi-brand.
   
• An upgrade of the parent’s rating, assuming Scope’s expectation of group support has not changed.

Scope would downgrade the rating in the case of:

• An expectation of a lower degree of group support, for instance if the long-term strategic importance of CAAB were to decline, which would lead to the revision of the rating approach from top-down to bottom-up.
   
• A downgrade of the parent’s rating, assuming Scope’s expectation of group support has not changed.

Overview of the rating construct

Operating environment: not applicable (from supportive)

Business model: not applicable (from consistent)

Initial mapping refinement: not applicable (from high)

Initial mapping: not applicable (from bbb/bbb+)

Long-term sustainability: not applicable (from developing)

Adjusted anchor: not applicable (from bbb)

Earnings capacity and risk exposures: not applicable (from supportive)

Financial viability management: not applicable (from comfortable)

Additional rating factors: not applicable (from neutral)

Standalone assessment: not applicable (from a-)

External support: highly integrated, top-down approach (from less integrated, bottom-up approach)

Issuer rating: A+ (from A)

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

Methodology
The methodology used for these Credit Ratings and Outlooks, (Financial Institutions Ratings methodology, 7 February 2023), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. 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 Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party participation     YES
With access to internal documents                                    NO
With access to management                                            YES
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, third parties and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlooks and the principal grounds on which the Credit Ratings and Outlooks are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlooks are UK-endorsed.
Lead analyst: Nicolas Hardy, Executive Director
Person responsible for approval of the Credit Ratings: Dierk Brandenburg, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 17 May 2019. The Credit Ratings/Outlooks were last updated on 17 May 2022.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings.

Conditions of use / exclusion of liability
© 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis 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.