Scope Ratings GmbH (Scope) has today affirmed the European Investment Bank’s AAA long-term issuer and senior unsecured foreign-currency ratings, along with a short-term issuer rating of S-1+ in foreign currency. All Outlooks are Stable.

For the rating report, click here.

Summary and Outlook

The AAA rating of the European Investment Bank (EIB) reflects the supranational’s ‘Excellent’ intrinsic credit profile and ‘Excellent’ shareholder support. The EIB’s institutional profile is characterised by a record of excellent governance and an irreplaceable mandate from its EU members. The bank has been critical for supporting EU policies, including the response to the Covid-19 pandemic, financial support to Ukraine, and closing investment gaps by leveraging the impact of member states’ Next Generation EU funds and the InvestEU programme, as well as catalysing transition to carbon neutrality. The evolving mandate of the bank, in line with the shifting political priorities of the EU, will step up its support to the EU security and defence industry.

The EIB’s financial profile benefits from its ability to generate and retain capital every year since its inception in 1958, including during the Covid-19 pandemic and energy crisis. The EIB’s excellent asset quality with negligible non-performing loans is driven by its conservative lending policies, high asset protection, low exposure to climate-related risks, and its widely diversified portfolio across geographies, sectors and counterparties. The EIB’s strong liquidity profile is supported by its high level, 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 moderate liquidity buffers compared to peers’.

Finally, the EIB benefits from its highly rated key members. The six largest EU economies – Germany (AAA/Stable), France (AA/Negative), Italy (BBB+/Stable), Spain (A-/Positive), the Netherlands (AAA/Stable) and Belgium (AA-/Negative) – 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 135.5bn, which 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 recorded losses over a sustained period; ii) its liquidity buffers significantly reduced; and/or iii) highly rated key members were downgraded.

Rating rationale

The first driver of the EIB’s AAA rating is its ‘Excellent’ institutional profile.

This reflects the EIB’s excellent governance and irreplaceable mandate from its EU members. In recent years, it has been at the forefront of implementing the European Fund for Strategic Investments (EFSI) and its successor programme, InvestEU. The EIB also played a critical role in the EU’s response to the Covid-19 pandemic and Russia’s war in Ukraine. More recently, the EIB streamlined financial support for Europe’s security and defence industry by opening dedicated intermediated financing, demonstrating flexibility to support EU members in tackling new challenges.

The EIB is at the centre of the EU’s climate agenda to support the transition to a carbon-neutral and climate-resilient economy. The mid-term review of the Group Climate Bank Roadmap¹ indicates that the EIB is on track to deliver on its 2030 agenda to mobilise EUR 1trn in investment for climate action and environmental sustainability. The bank aligned all new operations with the Paris Agreement and the goal of allocating more than 50% of financing to climate action and environmental sustainability from 2025 onwards was already achieved in 2021 (51%) and grew further in 2022 (58%) and 2023 (60%). Climate action and environmental sustainability financing reached EUR 44.3bn in 2023, up from EUR 36.6bn in 2022.

With the adoption of its new Energy Lending Policy in 2019, the EIB decided to phase out the financing of energy projects reliant on unabated fossil-fuel energy, while a target was introduced in 2021 to increase the share of adaptation support to 15% of the bank’s overall finance for climate action financing by 2025. Following the mid-term review of the Energy Lending Policy in 2023, the EIB raised the financing targets to support the goals of the initial REPowerEU plan, from EUR 30bn until 2027 to EUR 45bn (REPowerEU+), with the objective to mobilise over EUR 150bn of new investment for the targeted sectors and accelerate the green transition towards decarbonising Europe by 2050.

The second driver underpinning the EIB’s AAA rating is its ‘Excellent’ financial profile.

The EIB has been profitable every year since its inception in 1958, with stable annual earnings². These are fully retained and thus contribute to the EIB’s accumulated reserves and, in turn, its capitalisation and lending capacity, in line with its Statute. Adjusted net income was EUR 2.27bn in 2023 (down from EUR 2.37bn in 2022), very close to unadjusted net income (EUR 2.28bn) and broadly in line with the past few years, resulting in a three-year weighted average return on equity of around 3%.

The EIB’s excellent asset quality reflects its conservative lending policies, high asset protection, and credit enhancements provided by the EU and its member states – including for non-EU exposures and exposures related to InvestEU. Its widely diversified portfolio across geographies, sectors and counterparties and its strong collateralisation also play an important role. Equity-type operations, while growing, remain moderate. Looking at the loan exposure at the EIB Group level, Scope notes that of the EUR 395.8bn in disbursements as of end-2023, EUR 218.6bn was ultimately lent to or backed by sovereigns or public institutions, or about 55%. Of the remaining EUR 177.2bn, about EUR 120bn or 30.3% of the total relates to unsecured private sector exposures. Scope thus estimates that 60%-80% of the EIB’s portfolio is well-protected. This assessment is corroborated by the EIB’s internal grading, according to which about 87% of its exposures – based on the better of the borrower’s and the guarantor’s internal ratings – are investment grade, while, at EIB Group consolidated level, less than 2.3% are ‘high risk’ (‘b’) or worse.

Looking ahead, Scope notes that the EIB’s higher-risk activities will increase from about EUR 13.6bn in 2023 to EUR 16bn in 2024 and EUR 18bn in 2025 and 2026³. This will be driven by projects on own higher-risk activities and the InvestEU programme. These activities generate higher additionality, reaching new clients and sectors and developing innovative financing structures and products that address market needs. Similarly, EIB investments outside of the EU are set to increase slightly to an average EUR 9.7bn over 2024-26, from EUR 8.2bn over 2021-23, mostly under its own resources.

Even so, the EIB’s portfolio is highly diversified given its mandate to lend to sovereigns, public institutions, financial institutions and corporates across several sectors and jurisdictions. Its lending policies establish counterparty and sector limits to ensure sufficient diversification of its loans. As a result, at the EIB Group level, the top 10 nominal exposures constitute only 9.7% of the EIB’s portfolio, excluding exposures to sovereigns and those covered by sovereign guarantees, supporting its excellent asset quality.

Furthermore, the EIB has low exposure to climate-related risks. For physical risks, out of the 20-country exposure, 49% of exposures are in countries assessed as having ‘low’ risks, 36% with ‘very low’ risks, and only 2% with ‘moderate’ risks. This translates into a low share of non-financial corporate exposures having ‘high’ physical risks of around 3.4% related mostly to non-EU countries. For transition risks, the sectoral distribution of the portfolio indicates that about 3.5% of the non-financial corporate exposures has ‘high and unmitigated’ transition risks, which is consistent with the EIB self-assessment of 4%. The EIB’s low climate risks are further mitigated by climate risk management and specific policies. This includes the average loan maturity, estimated at around six years for the EIB, which reduces the risks from long-term climate change, resulting in an adjusted high climate risk exposure of around 3.4%.

Moreover, the EIB has established strong management and reporting practices, which further mitigate climate risks. This includes the Paris Alignment of Counterparties (PATH) framework⁴ encompassing a monthly screening of treasury portfolios, a shadow price of carbon in the economic appraisal of EUR 80 per tonne of CO2 emissions, which will be raised to EUR 250 by 2030, and a requirement for counterparties to develop and to disclose plans towards decarbonising business activity and/or improving resilience to physical risks⁵.

Finally, Scope notes that the EIB’s overdue payments beyond 90 days amounted to EUR 82.4m in 2023, down from a peak of EUR 180m in 2017. This represents just 0.02% of the EIB’s portfolio, one of the lowest ratios among peers. Looking at the wider definition of impaired exposures – i.e. amounts unlikely to be collected in full – the EIB’s record is also exceptional, with around EUR 1.8bn of impaired exposures as of end-2023, or about 0.4% of the loan book.

The EIB’s AAA rating is further underpinned by its status as a global benchmark issuer. EIB bonds are designated as high-quality liquid assets under the Basel framework and are included in the ECB’s asset purchase programmes, supporting the bank’s market access. The Eurosystem may hold EUR 134.8bn in EIB Euro-denominated debt since March 2015, about 33% of its outstanding debt securities. The EIB’s annual funding volume of around EUR 45bn-70bn over the past decade is, cumulatively, by far the largest among peers and set to remain elevated at EUR 60bn in 2024, with a borrowing authorisation of up to EUR 65bn. This, along with its highly diversified funding strategy in terms of non-core currencies (9 YTD as of early May 2024) and instruments (including EUR 14.6bn of green and sustainability bonds), underlines the EIB’s status as a global benchmark issuer. As of 3 May 2024, the EIB had already funded EUR 41.3bn or around 69% of the announced borrowing target⁶.

In the coming years, Scope expects the EIB to issue around EUR 50-55bn in 2025-26 in line with its Operational Plan 2024-26. Reflecting its appeal to global investors, the EIB benefits from a broad and very diversified investor base led by those in Europe (64% in 2024 YTD), followed by the Americas (21%), and Asia (14%). Bank treasuries (54% in 2024 YTD), fund managers, pension and insurance funds (20%), and central banks and official institutions (26%) account for most of the EIB’s investors.

The EIB is also the largest multilateral development bank issuer of green and sustainability bonds with dedicated use-of-proceeds, reflecting its inauguration of this segment in 2007 and its ability to pursue EU policy objectives via capital market activities. It has raised more than EUR 90bn in green and sustainability bonds across 23 currencies for an outstanding amount of about EUR 80bn as of early May 2024. In 2023, the EIB issued EUR 13.1bn in Climate Awareness Bonds and around EUR 1.5bn in Sustainability Awareness Bonds, about 29% of total issuance. Finally, Scope notes positively that the EIB is the world’s only supranational with access to the liquidity facilities of a central bank that issues a reserve currency, namely, the ECB. Scope acknowledges this unique funding capacity with a one-notch positive adjustment to its liquidity assessment.

The third driver of the EIB’s AAA rating is its excellent shareholder support.

In line with its governance, the six largest EU economies – Germany (AAA/Stable), France (AA/Negative), Italy (BBB+/Stable), Spain (A-/Positive), the Netherlands (AAA/Stable) and Belgium (AA-/Negative) – together account for around 78% of the EIB’s capital. Their weighted average rating of AA- drives Scope’s excellent assessment of shareholder support. This is further supported by strong legal basis for significant and timely shareholder support if ever needed, a consistent track record of capital increases and the absence of any capital call to date, although the EIB’s high-quality callable capital of EUR 135.5bn, covering about 30% of its outstanding mandated assets, is moderate among peers.

Despite these credit strengths, the EIB also faces the following credit challenges:

First, the EIB’s capitalisation relative to its outstanding assets is one of the lowest among supranationals. The EIB’s equity and reserves stood at around EUR 78.4bn as of end-2023, and EUR 93.0bn when including 10% of the callable capital of highly rated shareholders (AA- or above) within the EIB’s capital and 25% of the callable funds that have been authorised and appropriated by EU members. Although the EIB Group Strategic Roadmap increased the Gearing Ratio limit to 2.9 times – subject to the statute being changed –, the statutory leverage is up to 2.5 times its subscribed capital, accumulated reserves and profit, i.e. allowing for potential mandated assets of roughly EUR 768.3bn. This results in a capitalisation ratio of about 12%, below that of peers. However, Scope notes that the EIB operates at a higher actual capitalisation of around 20% and acknowledges the headroom of about 8pps (three-year weighted average 2021-23) between the actual capitalisation and the capitalisation level assuming maximum mandated assets with a one notch uplift. Moreover, counter-balancing the bank’s elevated leverage, the self-reported CET1 ratio has been on average above 30% since 2018 and stood at 33.1% at end-2023.

Second, while the EIB’s conservative liquidity management results in stable liquid assets, its three-year weighted average liquid assets ratio of around 55% for 2021-23 is markedly above the 2014 level of 41%. Scope estimates liquid assets at around EUR 74.4bn as of end-2023, below the EUR 79.7bn recorded in 2022. Conversely, Scope estimates elevated liabilities coming due within 12 months at EUR 148.0bn as of end-2023, including estimated 2024 disbursements of EUR 55.5bn. The 50.3% liquid asset ratio as of end-2023 implies that all outstanding liabilities and committed disbursements due within a year can be financed with available liquid assets for almost seven months without needing to access capital markets, which is somewhat lower than that of peers.

Finally, Scope notes that the EIB’s equity type financing, excluding its shares in the European Bank for Reconstruction and Development (AAA/Stable), has grown steadily since 2010 from EUR 2.0bn to EUR 11.4bn, or 12% of its equity and reserves. Similarly, the EIB’s contingent liabilities and guarantees have grown to EUR 26.9bn in 2023 (or about 36% of estimated liquid assets). Still, potential risks from these exposures are curtailed by the overall strong credit quality of the positions, their high diversification and the lack of substantial guarantee calls to date.

Factoring of environment, social and governance (ESG)

Scope considers ESG sustainability issues during the rating process as reflected in its supranational methodology. ESG factors are explicitly captured in Scope’s assessment of the institutional profile, which Scope assesses as ‘Excellent’ for the EIB, and the assessment of potential climate risks under the portfolio quality.

Scope’s supranational scorecard

Scope’s supranational scorecard, which is based on clearly defined quantitative parameters, provides an indicative AAA rating for the EIB. Additional considerations allow Scope to incorporate idiosyncratic characteristics that cannot be assessed in a consistent and comprehensive manner across all supranationals, but which may still affect the creditworthiness of the issuer.

No adjustment was made to the indicative rating of the EIB.

A rating committee has discussed and confirmed these results.

For further details, please see Appendix II of the rating report.

Rating committee
The main points discussed were: i) institutional profile; ii) financial profile, including capitalisation, asset quality, liquidity and funding; iii) shareholder support; iv) additional considerations; and viii) consideration of peers.

Rating driver references
1. The EIB Group Climate Bank Roadmap 2021-2025
2. EIB Financial Report 2023
3. The EIB Group Operational Plan 2024-2026
4. The EIB Group PATH framework, November 2023
5. TCFD Report 2022
6. EIB Investor Relations Presentation, May 2024

Methodology
The methodology used for these Credit Ratings and/or Outlooks, (Supranational Rating Methodology, 21 June 2024), 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                                            NO
The following substantially material sources of information were used to prepare the Credit Ratings: public domain and the Rated Entity.
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/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings and/or Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Thomas Gillet, Director
Person responsible for approval of the Credit Ratings: Giacomo Barisone, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 15 November 2019. The Credit Ratings/Outlooks were last updated on 21 July 2023.

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, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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