Rating action

Scope Ratings GmbH (Scope) has affirmed Credit Agricole SA’s issuer rating of AA- and preferred senior unsecured debt rating of AA-, with a Stable Outlook. The ratings were previously only available to investors on a subscription basis.

The full list of rating actions and rated entities is detailed at the end of this rating action release.

Key rating drivers

The ratings assigned to Credit Agricole S.A. are based on the credit fundamentals of the consolidated Credit Agricole Group (CA Group or the group), including the regional banks.

Business model assessment: Very resilient (low). The issuer rating is anchored by the group’s very resilient (low) business model assessment. With EUR 2.5trn in total assets as of Q3’24, CA Group is one of the largest banking groups in Europe. It is a well-diversified European banking group, with a leading retail and commercial banking franchise in France, complemented by a leading European asset management arm and a well-established insurance unit. Lending activities (47% of total assets) generate around 52% of revenues, wealth management and asset gathering activities represent 22% of revenues, while insurance 18%. The mix of activities allows for a balanced risk profile, combining a large, stable and mostly secured retail loan book that represents almost 50% of the total loan book, with potentially more cyclical corporate lending and investment banking activities.

In comparison to other large and diversified European banking groups, CA Group is more reliant on its home market, that represent around 68% of on and off-balance sheet exposures. The relevance of its operation in Italy with the previous acquisition of Credito Valtellinese, the purchase of a minority stake in Banco BPM and the creation of CA Auto Bank are key initiatives to broaden the group’s geographic footprint.

Operating environment assessment: Supportive (high). This assessment reflects Scope’s blended view of the different markets where Credit Agricole SA. operates.

France (Supportive high) is the core country for the group’s operating environment. France’s economic resilience is underpinned by a relatively high GDP per capita of EUR 38k, in line with the EU average. The economy is large and well diversified, driven by high value-added activities with a sound and resilient banking sector. Real GDP growth is expected at 1.1% in 2024 and 2025, and at 1.2% on average between 2026 and 2029. Lower inflation and interest rates are expected to support private demand, although a more restrictive fiscal stance and heightened geopolitical tensions could weigh on growth prospects. This trajectory accounts for the uncertainty surrounding the execution of the government’s fiscal strategy over the 2026-29 period as well as the moderate growth and inflation outlook. The banking sector is highly concentrated, with the five largest banking groups accounting for 80% of domestic assets, all combining banking and insurance activities. Cooperative banking groups account for the bulk of domestic retail operations. The profitability of the sector has been lagging the levels observed in other EU countries, due to legal caps (usury rates) and liabilities repricing more rapidly, including regulated savings (passbook Livret A).

France is a member of the European Banking Union, which has brought about a significant strengthening and harmonisation in bank regulation and supervision under the ECB’s Single Supervisory Mechanism, which we consider to be supportive of financial stability. The European Central Bank also shares with national central banks the role of lender of last resort, providing liquidity to the financial sector.

Italy (Supportive low) is the group’s second largest market, representing slightly less than 10% of the group’s credit exposure. It is the EU’s third largest economy and second largest manufacturer, with a significant trade surplus over the past decade. The GDP per capita is EUR 38k, in line with the EU average. Weak public finances, underpinned by a high government debt of around 137% of GDP in 2024 and elevated annual funding needs, may constrain the government’s ability to deploy countercyclical measures in downturns in the context of the rigid European fiscal framework. At the same time, structural challenges and an ageing and declining working population will continue to weigh on economic growth. The banking sector has been performing strongly, with high margins and low cost of risk driving high profitability in 2023 and 2024. Following a decade of balance sheet cleanup, NPLs are no longer a credit concern and appear well under control.

Scope arrives at an initial mapping of a based on a combined assessment of the issuer’s operating environment and business model.

Long-term sustainability assessment (ESG factor): Advanced (+1 notch). It reflects Scope’s view that the issuer is effectively and proactively managing sustainability-related considerations and stands out as a frontrunner in at least one sustainability theme that enhances its credit standing.

The group’s asset management and insurance subsidiaries have developed strong expertise and strategic focus in areas such as green bonds and sustainable investments. Scope considers that the focus on sustainability provides a competitive edge for the group’s wealth and asset management activities. Digital capabilities are also part of the strategic objectives to strengthen its banking franchise but have not materialised yet on revenue generation or efficiency gains. CA Group faces the challenge of optimising its retail operations while preserving its cooperative DNA grounded in a dense physical network, which could support efficiency improvements in the long-term. The group’s overall governance structure is well managed but complex, combining a broad business diversification and a cooperative structure.

The long-term sustainability assessment leads to an adjusted rating anchor of a+.

Earnings capacity and risk exposures assessment: Neutral. The assessment reflects Scope’s view that the group’s earnings capacity may fluctuate over economic cycles but is sufficient to cover expected losses. Asset quality is broadly in line with peers. Risks are unlikely to generate losses capable of undermining the issuer’s viability.

The group’s earnings capacity has been strengthening as the franchise grows in its domestic market as well as via its core presence in Italy. Return on average RWAs has been consistently improving following the increase in interest rates, reaching levels closer to 1.6% (from 1.0% – 1.2% for the period 2018-2022). However, the group’s return on average equity is relatively modest compared to peers (c. 7% three-year average), due to a relatively larger capital base compared with French peers.

CA Group’s risk exposures are well balanced comprising a large, granular retail and commercial loan portfolio and a well-diversified corporate loan portfolio. Cost of risk at group level is relatively stable and stood at 26bps in Q3 2024. Personal finance and mobility are a focus for growth, but at the same time a source of higher cost of risk (112bps in Q3 2024), that has been managed with a more selective approach since 2023.

Asset quality remains relatively stable with the non-performing loan ratio at 2.2% at the end of Q3 2024, which we consider adequate as the loan portfolio mainly comprises mortgage loans (45%), followed by corporate loans (33%), consumer finance (9%) and SMEs loans (5%). Scope considers that risks arising from sector concentrations are not material, as the loan book is well balanced. Beyond public sector and local authorities (17% of credit risk exposures), the largest sector concentration is real estate (4.3%). Given the group’s organic growth strategy and focus on retail commercial banking, Scope does not expect significant changes in the loan portfolio composition in the near-term.

Financial viability management assessment: Comfortable (+1 notch). The assessment reflects Scope’s view that the bank maintains a comfortable buffer above relevant regulatory requirements and Scope expects it to continue to do so. The issuer’s financial viability is largely resilient to tail-risk events.

The group’s prudential metrics are robust. CET 1 ratio as of Sept 2024 stood at 17.4%, reaching a buffer of 760bps above SREP requirement, and closely aligned with the CET1 target of above 17% by 2025. Scope expects the group to maintain solid loss-absorption buffers, well above minimum regulatory requirements, including a TLAC buffer (currently at a solid 510bps).

CA Group benefits from a stable and granular base of customer deposits that represent more than two-thirds of total funding and of which more than 60% are guaranteed retail deposits. Wholesale funding (30% of direct funding) is very stable and mainly composed by senior preferred debt (48% of the total), followed by senior secured including covered bonds (29% of the total). Liquidity is adequate and supported by a large liquidity reserve (EUR 466bn as of Q3 2024) and a LCR at 147% at group level.

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

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s view that the risks to the current rating are balanced.

The upside scenario for the ratings and Outlooks is:

1. Further improvement in profitability while maintaining good asset quality and preserving a low overall risk profile, leading to a more favourable earnings capacity and risk exposure assessment.

The downside scenarios for the ratings and Outlooks are (individually or collectively):

1. Asset quality deteriorates materially, with increasing provisions undermining the group’s capacity to generate earnings.
    
2. A more aggressive capital management policy, targeting a significant reduction in capital targets and regulatory buffers, that could result from greater RWA growth should the group decide to accelerate growth in riskier business segments, or significantly expand the scope of its international operations.

Subsidiaries and affiliates: ratings and Outlooks

Credit Agricole Home Loan SFH SA: AA-/Stable. The issuer rating and Outlook on Credit Agricole Home Loan SFH are aligned with the issuer rating and Outlook of the parent, Credit Agricole SA, reflecting Scope’s view that the subsidiary would likely receive full support from its parent under exceptional circumstances.

The subsidiary is of key strategic importance for the group as the issuer of covered bonds, playing an important role in optimising funding costs and preserving access to a diversified investor base.

Scope could lower the rating in case of a change in the assumption of full support from the parent.

Credit Agricole Public Sector SCF SA: AA-/Stable. The issuer rating and Outlook on Credit Agricole Public Sector SCF are aligned with the issuer rating and Outlook of the parent, Credit Agricole SA, reflecting Scope’s view that the subsidiary would likely receive full support from its parent under exceptional circumstances.

The subsidiary is of key strategic importance for the group as the issuer of covered bonds, helping in optimising funding costs and preserving access to a diversified investor base.

Scope could lower the rating in case of a change in the assumption of full support from the parent.

CA Auto Bank SpA: A+/Stable. The issuer rating on CA Auto Bank (CAAB) is one notch below the issuer rating of the parent, Credit Agricole SA, reflecting Scope’s view that the subsidiary would likely receive high support from its parent under exceptional circumstances. The Stable Outlook is aligned to the Outlook of the parent.

Following the reorganisation of the group’s partnership with the car manufacturer Stellantis, CA Group has acquired the remaining 50% stake in CAAB and intends to position CAAB as an independent pan-European leader in multi-brand automotive financing. This is in line with the group’s strategic direction. CAAB is largely integrated with the group from an operational standpoint, with some degree of autonomy for instance in terms of funding.

Scope could upgrade/downgrade the rating in case of a change in the assumption of support from the parent.

Debt ratings

Preferred senior unsecured debt: AA-/Stable. The rating is aligned with the issuer rating and applies to senior unsecured debt ranking above other classes of senior unsecured debt.

Non-preferred senior unsecured debt: A+/Stable. The rating is one notch lower than the issuer rating, reflecting its statutory subordination.

Short-term debt: S-1+. Credit Agricole S.A.’s short-term credit rating is derived from the long-term issuer credit rating. The rating is consistent with Scope’s long-term/short-term rating correspondence table. The choice of the highest possible short-term rating (S-1+ given the AA- issuer rating) reflects the strength of the liquidity profile of the group and access to central bank funding.

Environmental, social and governance (ESG) factors

Please refer to the ‘long-term sustainability assessment’ under the ‘key rating drivers’ section above for the ESG analysis.

All rating actions and rated entities

Credit Agricole SA

Issuer rating: AA-/Stable, affirmed

Preferred senior unsecured debt rating: AA-/Stable, affirmed

Non-preferred senior unsecured debt rating: A+/Stable, affirmed

Short-term debt rating: S-1+/Stable, affirmed

Credit Agricole Home Loan SFH

Issuer rating: AA-/Stable, affirmed

Credit Agricole Public Sector SCF

Issuer rating: AA-/Stable, affirmed

CA Auto Bank SpA

Issuer rating: A+/Stable, affirmed

Preferred senior unsecured debt rating: A+/Stable, affirmed

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/or Outlooks, (Financial Institutions Rating Methodology, 6 February 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, the Rated Entity, 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/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 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: Carola Saldias, Senior Director
Person responsible for approval of the Credit Ratings: Karlo Fuchs, Managing Director.
Credit Agricole SA’s issuer Credit Rating/Outlook was first released by Scope Ratings on 2 April 2014. The Credit Rating/Outlook was last updated on 23 April 2024.
Credit Agricole SA’s preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 2 April 2014. The Credit Rating/Outlook was last updated on 23 April 2024.
Credit Agricole SA’s short-term Credit Rating/Outlook was first released by Scope Ratings on 22 May 2014. The Credit Rating/Outlook was last updated on 23 April 2024.
Credit Agricole SA’s non-preferred senior unsecured debtCredit Rating/Outlook was first released by Scope Ratings on 6 March 2020. The Credit Rating/Outlook was last updated on 23 April 2024.
Credit Agricole Home Loan SFH’s issuer Credit Rating/Outlook was first released by Scope Ratings on 4 February 2019. The Credit Rating/Outlook was last updated on 23 April 2024.
Credit Agricole Public Sector SCF’s issuer Credit Rating/Outlook was first released by Scope Ratings on 4 February 2019. The Credit Rating/Outlook was last updated on 23 April 2024.
CA Auto Bank SpA’s Credit Ratings/Outlooks were first released by Scope Ratings on 17 May 2019. The Credit Credit Ratings/Outlooks were last updated on 23 April 2024.

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
© 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab 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.