Rating action

Scope Ratings GmbH (Scope) has affirmed the AAA rating on the French covered bonds (obligations foncières) issued by Compagnie de Financement Foncier. The Outlook is Stable.

Download the covered bond performance update.

Key rating drivers

Covered bond rating anchor: A+. The issuer rating is the starting point of the covered bond rating. It reflects Compagnie de Financement Foncier’s (CieFF) full ownership by Crédit Foncier de France (CFF) and the close integration with BPCE Group, one of France’s leading banking franchises (see detailed rating reports on CFF – here or the ultimate parent BPCE - here).

Governance support (plus up to six notches). This rating uplift reflects the high likelihood of covered bonds being maintained as a going concern in the event of regulatory action in the issuer and its ultimate parent as well as a smooth transition from the first (issuer) to the second recourse (cover pool) if needed. It consists of two notches from Scope’s legal framework and structural support assessment and four notches from our resolution regime and systemic importance assessment.

Scope’s legal framework and structural support analysis for CieFF’s French covered bonds (SCF) considers: 1) the cover pool’s valid segregation from a potential insolvency estate of the issuer or the issuer’s parent; 2) the very high likelihood of bond payments continuing after a moratorium or insolvency; 3) strong legal asset eligibility and risk management principles; 4) that enhancements to the covered bond programme remain available after a moratorium or insolvency of the issuer; and 5) the strong regulatory oversight specifically for French covered bonds. (ESG factor)

The resolution regime and systemic importance assessment considers: 1) the existence and clarity of statutory provisions that allow to maintain an issuer and its covered bonds as a going concern upon a regulatory intervention; 2) the strength of such statutory provisions protecting covered bonds against regulatory actions or bail-in; 3) the very high systemic importance in France of the issuer and its parent and the very high relevance of French covered bonds; and 4) French’s strong proactive stakeholder community. (ESG factor)

Cover pool support (plus up to three notches). This potential additional rating uplift reflects the impact of the second recourse. It considers the programmes cover pool complexity (CPC) risk category of “Low”-risk which could translate into an additional cover pool supported uplift of up to three additional uplift notches. (ESG factor)

The rating supporting overcollateralisation (OC) relies on the legal minimum OC of 5.0%. An OC of 9.0% would allow to shield the current rating against a five-notch issuer downgrade to BBB-. This is the lowest issuer rating that still allows to maintain the current assigned ratings.

This OC reflects:

• Credit risk – highly diversified, seasoned mixed pool. The covered bonds are covered by a portfolio of mixed cover pool assets comprising public-sector loans, residential mortgage loans, commercial mortgage loans and substitute assets. The share of public sector loans is increasing following the group’s strategic decision to use this programme to refinance its public sector lending. The public sector assets mainly consist of granular, domestic sub-sovereign and lower-tier public sector exposures. The mortgage portfolio is highly granular and benefits from around 50% of state guaranteed housing loans as well as first lien mortgages. Commercial mortgage loans are limited (1%). We have calculated a weighted average annualised default rate of 32bps together with an average coefficient of variation of 78% and stressed recovery rate of 70.7%.
   
• Market risk – Matched profile, prudent hedge strategy. The issuer has a prudent strategy to mitigate market risk (i.e. interest and foreign exchange risks). Residual interest rate risk is low. Maturity mismatches are also limited. The weighted average life (WAL) of the cover assets stands at 7.2 years, compared to 6.2 years for the liabilities. This creates sensitivity to rising interest rates, particularly in a low prepayment (mortgage loans) environment. Mismatches could necessitate asset sales that with rising interest rates could result in significant present value discounts. However, this risk is partially mitigated by a buffer of 7.7% in highly liquid substitute assets. In total, the programme also benefits from 32% of central bank eligible assets.

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

Outlook and rating sensitivities

The Stable Outlook on the covered bonds reflects Scope’s view on the stable credit performance of the issuer, and that governance support or cover pool support factors will not materially change.

Upside scenarios are not applicable as the rating is the highest achievable.

The downside scenarios for the rating and Outlook are (individually or collectively):

• An issuer rating/Outlook downgrade by more than five notches
   
• A reduction in the governance support uplift by more than five notches
   
• A deterioration in Scope’s CPC assessment that could reduce the potential credit support from the cover pool
   
• Available or committed OC below rating-supporting or legal minimum

Environmental, social and governance (ESG) factors

Governance is a key rating driver. For more detail, please refer to ‘governance support’ and ‘cover pool support’ (CPC assessment) under the ‘key rating drivers’ section above.

Quantitative analysis and assumptions

For its quantitative analysis Scope applied assumptions as laid down in the covered bond methodology.

Stress testing
No stress testing was performed.

Cash flow analysis
The assessment of potential cover pool support uplift is based on a cash flow analysis using Scope Ratings’ covered bond model (Covered Bonds Expected Loss Model Version 1.2). The model applies Credit Rating distance-dependent stresses to scheduled cash flows to simulate the impact of increasing credit and market risks. The outcome of the analysis is an expected loss rate and an expected weighted average life for the instruments based on the generated cash flows.

Methodology
The methodology used for this Credit Rating and Outlook, (Covered Bond Rating Methodology, 25 July 2025), is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The models used for this Credit Rating and Outlook are (Covered Bonds Expected Loss Model Version 1.2; Portfolio Model Version 1.1), available in Scope Ratings’ list of models, published under 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 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 scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at 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 scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Rating if the Credit Rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Rating: 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 the Credit Rating 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 Rating and Outlook and the principal grounds on which the Credit Rating and Outlook are based. Following that review, the Credit Rating and Outlook was not amended before being issued.

Regulatory disclosures
The Credit Rating and Outlook is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Rating and Outlook is UK-endorsed.
Lead analyst: Mathias Pleißner, Executive Director
Person responsible for approval of the Credit Rating: Karlo Fuchs, Managing Director
The Credit Rating/Outlook was first released by Scope Ratings on 7 February 2017. The Credit Rating/Outlook was last updated on 11 October 2024.

Potential conflicts
See 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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