Rating action

Scope Ratings GmbH (Scope) has affirmed BNP Paribas SA (BNPP)’s long-term issuer 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 at the end of this rating action release.

Key rating drivers

Business model assessment: Very resilient (low). The issuer rating is anchored by the very resilient (low) business model assessment. With total assets of EUR 2.7trn, BNPP is a pan-European financial conglomerate, one of the largest banking groups globally and a globally systemically important financial institution. Revenues are well-balanced between interest and non-interest income, with 50% of revenues coming from commercial and personal banking activities, while 35% is derived from CIB and 13% from insurance and wealth management.

The group has been able to strengthen its European market position in CIB, leading in syndicated loans, DCM and bond issuances, ESG bonds and loans. The global markets business is also strong, with solid positions in fixed-income, equity and currency markets. While the retail banking and specialised lending businesses in eurozone countries are core for the group’s banking activities, the loan book represents only 30% of total assets, making the balance sheet of the group relatively light in terms of asset risk intensity when compared with peers. However, despite this relatively lower component of loans compared to peers, BNPP’s significant business and geographic diversification has provided stable and recurrent earnings through the cycle.

Operating environment assessment: Supportive (high). The assessment reflects Scope’s blended view of the different markets where BNPP operates. France represents around 30% of BNPP’s credit exposures, followed by Belgium and Italy with 12% and 10%, respectively.

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 part 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.

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 BNP 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 assessment has been changed from ‘Best in Class’ to ‘Advanced’.

ESG considerations are a key strategic focus for BNPP’s due to its relevant position as asset and wealth manager and leading role as global ESG bonds and loans issuer. The acquisition of AXA IM supports further its role as a relevant ESG investor, increasing its footprint globally. The strategic focus to become a reference partner for ESG transition on its CIB business is a clear indication of the involvement to support its clients to actively manage transition risks.

Investments in digital capabilities to strengthen its retail banking footprint, for example through the development of its digital bank Hello Bank, highlight the relevance of digital banking for BNPP’s business model. However, in our view, progress in this space is not yet translating in relevant competitive differentiation neither on financial advantages, via efficiency improvements.

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

Earnings capacity and risk exposures assessment: Supportive (+1 notch). The assessment reflects Scope’s view that earnings capacity is stable through economic cycles and provides a strong buffer against losses. Risks are well managed and are highly unlikely to lead to losses capable of undermining the issuer’s viability.

BNPP’s has been able to steadily grow recurring earnings as the group enlarges its footprint outside its core EU markets. While the bulk of its lending activities (retail, commercial and specialised finance) have a higher risk-return profile compared to traditional mortgages, the group has demonstrated an ability to generate a consistent gross revenue stream, with a pre-provision profit in the EUR 14bn to EUR 16bn range for the past decade. Revenues from securities services, insurance and wealth management, that carry almost no asset quality risk, are growing and represent now more than 20% of total revenues. Scope notes that the volatility that could arise from revenues related to corporate and institutional banking has been contained in recent years and has been offset by growth from insurance and wealth management. Thus, return on average RWAs has remained supportive and on average at 1.4% for the past 5 years. Scope considers that BNPP has room to improve cost efficiency, and notes that the group is undertaking significant investments to restructure and improve its operations.

Risk exposures are relatively granular and well diversified. Cost of risk stands below 50bps for most business lines, and NPLs have improved steadily reaching 2.9% as of Q3 2024, the lowest level for the past decade. Personal Finance, the business line which includes consumer credit and displays more volatile credit performance (cost of risk of 140bps as of Q3 2024) is undergoing some refocusing, including divestments in several countries and reorganisation of the operational model. Scope believes this will in the medium term, support further the stability of earnings.

Financial viability management assessment: Adequate. The assessment reflects Scope’s view that financial viability management provides some buffer and, under a base case scenario, could not imminently push any metric close to minimum requirements or jeopardise the issuer’s financial viability.

With a CET 1 ratio at 12.7% as of Sept 2024, and a target of 12%, BNPP manages capital buffers more tightly than peers. However, Scope considers the buffer adequate, due to its large absolute size in nominal terms and the high granularity of risk exposures. The 415bps buffer to TLAC requirements, comprising exclusively of subordinated instruments, provides additional comfort and protection to the senior portion of the capital structure.

Funding is characterised by a low component of deposits when compared to peers, reflecting its active funding strategy in wholesale markets. Deposits (of which 46% are retail) represent 57% of direct funding, while wholesale funds represent 37% as of Q3 2024. Given its large use of wholesale funding, funding costs could be subject to some volatility in times of financial distress, but BNPP has a strong track record as a frequent issuer in international financial markets and its funding access has remained stable through the cycle.

Liquidity is adequate considering the group’s orientation to CIB and wealth management. While the LCR ratio stood at 124% as of Sept 2024, relatively low compared with peers, the nominal size of the liquidity reserve, EUR 467bn as of Q3 2024, represents more than half of the group’s deposits base.

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. A more conservative capital management policy allowing for larger buffers above minimum regulatory requirements, leading to a positive reassessment of the group’s financial viability management.

The downside scenario for the ratings and Outlooks is:

1. A material deterioration of asset quality or a weakening in the group’s earnings generation potential, resulting in a downgrade of the earnings capacity and risk exposure assessment.

Subsidiaries and affiliates: ratings and Outlooks

BNP Paribas Fortis: AA-/Stable. The issuer rating and Outlook on BNP Paribas Fortis (Fortis) are aligned with the rating and Outlook of the parent, BNP Paribas SA, reflecting Scope’s view that Fortis would likely receive full support from its parent under exceptional circumstances.

Acquired in 2009, the bank is fully owned by BNPP. Fortis is essential to the group’s strategy in developing its European footprint. It operates as a diversified universal bank with a large customer base and collaborates with a wide range of specialised group subsidiaries. It also makes a material contribution to group’s revenues, and it is part of the group resolution perimeter (single point of entry strategy).

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

Banca Nazionale Del Lavoro: AA-/Stable. The issuer rating and Outlook on Banca Nazionale del Lavoro (BNL) are aligned with the rating and Outlook of the parent, BNP Paribas SA, reflecting Scope’s view that, BNL would likely receive full support from its parent under exceptional circumstances.

Acquired in 2006, the bank is fully owned by the BNPP. BNL is essential to the group’s strategy to develop a leading multi-domestic European bank and is part of the group resolution perimeter (single point of entry strategy). As its 3rd largest operating market, BNL ranks sixth among commercial banks in Italy by customer loans and total assets, with a wide commercial presence. BNL’s products and services leverage on the group’s capabilities, which go well beyond retail banking with an established presence in corporate and private banking as well as wealth management. Group affiliation also affords BNL lower funding costs, including direct funding from the parent. Most risk management functions are performed with the oversight of the group, while capital, funding and liquidity resources are coordinated at group level.

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

BNP Paribas Home Loan SFH: AA-/Stable. The issuer rating and Stable Outlook on BNP Paribas Home Loan SFH (Société de Financement de l’Habitat) are aligned with those of the parent, BNP Paribas SA, reflecting Scope’s view that, BNP Paribas Home Loan SFH would likely receive full support from its parent under exceptional circumstances.

BNP Paribas Home Loan SFH is a specialised vehicle used by BNPP to refinance its home loan business. The subsidiary’s sole purpose is to finance home loans and certain other assets eligible under the French covered bond legal framework. Its activities and control systems are wholly integrated with those of the parent. Directors are all BNPP executives. It has no employees or separate premises.

Scope could lower the rating in case of a change in the assumption of full 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+/Stable. BNP Paribas 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

BNP Paribas 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

BNP Paribas Fortis

Issuer rating: AA-/Stable, affirmed

Senior unsecured debt rating: AA-/Stable, affirmed

Banca Nazionale Del Lavoro

Issuer rating: AA-/Stable, affirmed

BNP Paribas Home Loan SFH

Issuer rating: AA-/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 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     NO
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 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 and 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 Andrea Saldias Castillo, Senior Director
Person responsible for approval of the Credit Ratings: Marco Troiano, Managing Director
BNP Paribas SA issuer Credit Rating/Outlook was first released by Scope Ratings on 2 April 2014. The Credit Rating/Outlook was last updated on 5 June 2024.
BNP Paribas SA 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 5 June 2024.
BNP Paribas SA short-term Credit Rating/Outlook was first released by Scope Ratings on 22 May 2014. The Credit Rating/Outlook was last updated on 5 June 2024.
BNP Paribas SA non-preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 4 March 2020. The Credit Rating/Outlook was last updated on 5 June 2024.
BNP Paribas Home Loan SFH SA Credit Rating/Outlook was first released by Scope Ratings on 10 January 2019. The Credit Rating/Outlook was last updated on 5 June 2024.
BNP Paribas Fortis SA Credit Ratings/Outlooks were first released by Scope Ratings on 10 January 2019. The Credit Ratings/Outlooks were last updated on 5 June 2024.
Banca Nazionale del Lavoro Credit Rating/Outlook was first released by Scope Ratings on 12 December 2018. The Credit Rating/Outlook was last updated on 5 June 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.