Paris, September 21, 2022 — Moody’s Investors Service (“Moody’s”) today affirmed the Aa3 long-term deposit and issuer ratings of BNP Paribas Personal Finance (BNPP PF). Moody’s also affirmed BNPP PF’s P-1 short-term deposit and issuer ratings, Aa3(cr)/P-1(cr) counterparty risk (CR) ratings and Aa3/P-1 ratings. counterparty risk (CRR). . In addition, Moody’s confirmed the bank’s Baseline Credit Assessment (BCA) of ba1 and Adjusted BCA of baa1 which incorporates three notches of affiliation support from ultimate parent BNP Paribas (BNPP, Aa3/Aa3 stable , baa1). The outlook for long-term deposit and issuer ratings is stable.
RATINGS RATIONALE
BCA and long-term ratings
BNPP PF’s BCA assertion of ba1 reflects the institution’s strong franchise as a specialist consumer finance company with significant market shares, primarily in Europe. BNPP PF consolidates most of the consumer credit activities of the BNPP group in its reporting perimeter such as France, Italy, Spain or the United Kingdom, but is also closely involved in the consumer credit activities carried out by other BNPP subsidiaries, such as in Belgium, Germany or North Africa. The BCA takes into account the relatively high risk profile of BNPP PF on its credit portfolio compared to its closest peers as well as the average of European retail banks. At the same time, asset risks are partly mitigated by BNPP PF’s geographic diversification; its focus on stable European operating environments for growth; and a gradual rebalancing of products in favor of less risky products such as car loans. Moody’s expects continued inflationary pressures to likely increase loan losses, although the rising proportion of auto loans is moderating downside risks.
The BCA also reflects BNPP’s modest profitability, which has been declining for the past five years, partly due to the very low interest rate environment in Europe. The pandemic also had a negative impact on loan production, due to repetitive containment measures. In addition, changing consumer needs required material investments to transform BNPP PF’s infrastructure. Moody’s expects the impact of rising inflationary pressures on bank spending, costs of risk and a reduction in loan production over the outlook horizon to somewhat offset the positive impact of the revision of prices on income.
The BCA also takes into account the strong dependence on BNPP for the financing and management of the liquidity of BNPP PF and takes into account the modest capitalization of the entity (the Common Equity Tier 1 (CET1) ratio is 10.2% end of 2021). Capital is optimized at group level and Moody’s expects capital retention to be commensurate with BNPP PF’s capital needs and support future growth ambitions.
BNPP PF’s baa1 Adjusted BCA assertion reflects Moody’s assumption of a very high probability of support from BNP Paribas. This is supported by (1) the strategic position of BNPP PF as the operational arm of the group for the group’s consumer finance activities, one of the core businesses of BNPP and several of its international subsidiaries; (2) The integration of BNPP PF into the management of the group, leading to very strong dependence and interconnections between BNPP and BNPP PF for capital, financing and asset-liability management.
Confirmation of BNPP PF’s Aa3 long-term deposit and issuer ratings reflects Moody’s view that BNPP PF would be included in BNPP’s resolution scope. BNPP PF’s Aa3 issuer and deposit ratings are therefore based on (1) its baa1 adjusted BCA; (2) the application of Moody’s Advanced Loss Given Failure (LGF) analysis at BNPP level, resulting in a three-notch increase in adjusted BCA, given the significant volumes of senior debt and junior deposits; and (3) an additional notch of increased government support, reflecting a moderate likelihood of government support.
Rating outlook
The ratings outlook for deposits and long-term issuers is stable, in line with the ratings outlook for BNP Paribas, also reflecting Moody’s expectation that BNPP PF’s stand-alone credit profile should be resilient to adverse effects. negative effects of the inflationary environment on the risks of its assets and profitability.
FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS
BNPP PF’s BCA could be upgraded in the event of a significant and sustainable increase in profitability or capital, or a significant reduction in asset risk. An upgrade of the BCA will likely not result in an upgrade of its issuer and depository ratings as they will be constrained by BNPP’s ratings. BNPP PF’s issuer and depository ratings could be upgraded if BNPP’s ratings were to be upgraded.
The BCA of BNPP PF could be downgraded in the event of a material deterioration in the quality of its assets, its solvency or its liquidity and the funding support of its parent company. A downgrade of the BCA will not necessarily imply a downgrade of its issuer or depository ratings if it were concluded that BNPP’s support would remain very high. Finally, a downgrade in BNPP’s ratings would trigger a similar action at BNPP PF.
LIST OF AFFECTED RATINGS
..Issuer: BNP Paribas Personal Finance
Statement:
….Base credit rating adjusted, Baa1 confirmed
….Basic credit assessment, Confirmed ba1
….Assessment of long-term counterparty risk, confirmed Aa3(cr)
….Assessment of short-term counterparty risk, confirmed P-1(cr)
….Long-term counterparty risk ratings, confirmed Aa3
….Short Term Counterparty Risk Ratings, Confirmed P-1
….Long-term issuer rating, confirmed Aa3, outlook remains stable
….Short-term issuer rating, confirmed P-1
….Long-term bank deposit rating confirmed Aa3, outlook remains stable
….Short-term bank deposit rating, confirmed P-1
Action Outlook:
….Outlook remains stable
MAIN METHODOLOGY
The main methodology used in these ratings is the Methodology for Banks published in July 2021 and available on https://ratings.moodys.com/api/rmc-documents/71997. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.
REGULATORY INFORMATION
For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.
For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.
For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following information, if applicable to the jurisdiction: Ancillary services, Information to be provided to the rated entity, Information to be provided by the rated entity.
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The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.
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The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.
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Olivier Panis
Senior Vice President
Financial Institutions Group
Moody’s France SAS
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France
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Alain Laurine
Associate General Manager
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Customer service: 44 20 7772 5454
Release Office:
Moody’s France SAS
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