Paris, December 15, 2022 — Moody’s Buyers Service (“Moody’s”) Â at the moment affirmed the long-term issuer and backed senior unsecured debt rankings of Agence France Locale (AFL) at Aa3 with a steady outlook. Moody’s additionally affirmed the financial institution’s Baseline Credit score Evaluation (BCA) and Adjusted BCA at a3, and its long-term and short-term Counterparty Danger Evaluation (CR Assessments) at Aa3(cr) and Prime-1(cr) respectively. The outlook on the long-term issuer and backed senior unsecured debt rankings stays steady.
A full checklist of affected rankings might be discovered on the finish of this press launch.
RATINGS RATIONALE
The affirmation of the issuer and backed senior unsecured rankings at Aa3 displays (1) AFL’s a3 BCA and adjusted BCA; (2) the appliance of Moody’s Superior Loss Given Failure (LGF) evaluation, leading to a two-notch LGF uplift from the Adjusted BCA of a3; and (3) the federal government help uplift of 1 notch.
The affirmation of the a3 BCA displays Moody’s view that (1) the entity’s fundamentals stay sturdy; (2) its two-tier governance construction offers acceptable oversight ; and (3) AFL shall be ready, over the outlook horizon, to keep up excessive asset high quality, a steady funding construction and satisfactory solvency.
Moody’s believes that AFL’s means to interrupt even in 2020 and 2021 (internet earnings of €1.7 million in 2021) is testimony to the long-term sustainability of its enterprise mannequin. The financial institution has demonstrated its means to increase its mortgage e-book and entice new members, which is a prerequisite for the financial institution’s capital base to continue to grow. Moody’s expects additional steady enhance in new memberships, and that the mixture of a rising mortgage e-book, steady margins and working prices, will lead AFL’s profitability to stay constructive in 2022 and 2023.
As of the tip of June 2022, AFL’s Frequent Fairness Tier 1 (CET1) capital ratio was 16.2%, offering a snug buffer above the minimal requirement of 9.25%. Moody’s expects the CET1 ratio to progressively decline within the subsequent three years given the anticipated continued enhance in mortgage manufacturing, but additionally believes that the danger of AFL’s solvency falling beneath the interior goal of 12.5% threshold could be very low.
The majority of AFL’s funding is made up of senior unsecured debt, which offers a big cushion to the financial institution’s collectors in case of failure. This ends in a Loss Given Failure (LGF) uplift of two notches from the BCA.
AFL’s collectors profit from the joint and a number of other assure offered by all of the members as much as their respective excellent loans at AFL. At this stage of AFL’s growth and given its very small market share, Moody’s believes that the chance of help from the French central authorities stays reasonable, basically reflecting its willingness to keep away from reputational harm to the French sovereign and the native governments in case of a default of AFL. Because of the members’ assure and the reasonable help assumption from the central authorities, the chance of presidency help for AFL’s senior unsecured debt is excessive, which ends up in a one-notch uplift.
OUTLOOK
The outlook on AFL’s long-term issuer and backed senior unsecured rankings is steady as Moody’s doesn’t count on any important modifications within the financial institution’s creditworthiness over the following 12-18 months. The outlook can be pushed by the steady outlook on the Aa2 ranking of the Authorities of France.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Though unlikely over the outlook horizon, an improve of the BCA might be contemplated as soon as AFL has constructed up a extra scalable franchise and generated larger recurring income. Nevertheless, at current it’s unlikely that an improve of AFL’s BCA would lead to an improve of its long-term issuer and backed senior unsecured rankings to Aa2 i.e. at par with the sovereign ranking of France as a result of Moody’s believes that the chance of help from the only real French authorities stays reasonable.
AFL’s BCA might be downgraded if the financial institution (1) didn’t maintain its worthwhile enterprise mannequin; (2) had been unable to lift funding at a value that might enable it to originate aggressive loans; or (3) if asset threat had been to deteriorate unexpectedly. A deterioration in France’s Macro Profile (at present Sturdy+) may additionally set off a downgrade of AFL’s BCA.
AFL’s long-term issuer and backed senior unsecured rankings might be downgraded if (1) its BCA had been to be downgraded; (2) the chance of help from member native authorities  or central authorities help had been to say no; or (3) the French authorities’s ranking had been to be downgraded.
LIST OF AFFECTED RATINGS
Issuer: Agence France Locale
..Affirmations:
….Lengthy-term Counterparty Danger Rankings, affirmed Aa3
….Brief-term Counterparty Danger Rankings, affirmed P-1
….Lengthy-term Counterparty Danger Evaluation, affirmed Aa3(cr)
….Brief-term Counterparty Danger Evaluation, affirmed P-1(cr)
….Lengthy-term Issuer Score, affirmed Aa3, outlook stays Secure
….Brief-term Issuer Score, affirmed P-1
….Baseline Credit score Evaluation, affirmed a3
….Adjusted Baseline Credit score Evaluation, affirmed a3
….Backed Senior Unsecured Common Bond/Debenture, affirmed Aa3, outlook stays Secure
….Backed Senior Unsecured Medium-Time period Notice Program, affirmed (P)Aa3
….Backed Business Paper, affirmed P-1
..Outlook Motion:
….Outlook stays Secure
PRINCIPAL METHODOLOGY
The principal methodology utilized in these rankings was Banks Methodology revealed in July 2021 and obtainable at https://rankings.moodys.com/api/rmc-documents/71997. Alternatively, please see the Score Methodologies web page on https://rankings.moodys.com for a duplicate of this technique.
REGULATORY DISCLOSURES
For additional specification of Moody’s key ranking assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure kind. Moody’s Score Symbols and Definitions might be discovered on https://rankings.moodys.com/rating-definitions.
For rankings issued on a program, collection, class/class of debt or safety this announcement offers sure regulatory disclosures in relation to every ranking of a subsequently issued bond or observe of the identical collection, class/class of debt, safety or pursuant to a program for which the rankings are derived solely from present rankings in accordance with Moody’s ranking practices. For rankings issued on a help supplier, this announcement offers sure regulatory disclosures in relation to the credit standing motion on the help supplier and in relation to every explicit credit standing motion for securities that derive their credit score rankings from the help supplier’s credit standing. For provisional rankings, this announcement offers sure regulatory disclosures in relation to the provisional ranking assigned, and in relation to a definitive ranking which may be assigned subsequent to the ultimate issuance of the debt, in every case the place the transaction construction and phrases haven’t modified previous to the project of the definitive ranking in a way that might have affected the ranking. For additional info please see the issuer/deal web page for the respective issuer on https://rankings.moodys.com.
For any affected securities or rated entities receiving direct credit score help from the first entity(ies) of this credit standing motion, and whose rankings could change because of this credit standing motion, the related regulatory disclosures shall be these of the guarantor entity. Exceptions to this method exist for the next disclosures, if relevant to jurisdiction: Ancillary Providers, Disclosure to rated entity, Disclosure from rated entity.
The rankings have been disclosed to the rated entity or its designated agent(s) and issued with no modification ensuing from that disclosure.
These rankings are solicited. Please confer with Moody’s Coverage for Designating and Assigning Unsolicited Credit score Rankings obtainable on its web site https://rankings.moodys.com.
Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated ranking outlook or ranking evaluation.
Moody’s basic rules for assessing environmental, social and governance (ESG) dangers in our credit score evaluation might be discovered at https://rankings.moodys.com/paperwork/PBC_1288235.
The International Scale Credit score Score on this Credit score Score Announcement was issued by considered one of Moody’s associates outdoors the UK and is endorsed by Moody’s Buyers Service Restricted, One Canada Sq., Canary Wharf, London E14 5FA beneath the regulation relevant to credit standing companies within the UK. Additional info on the UK endorsement standing and on the Moody’s workplace that issued the credit standing is offered on https://rankings.moodys.com.
Please see https://rankings.moodys.com for any updates on modifications to the lead ranking analyst and to the Moody’s authorized entity that has issued the ranking.
Please see the issuer/deal web page on https://rankings.moodys.com for extra regulatory disclosures for every credit standing.
Roland Auquier
Vice President – Senior Analyst
Monetary Establishments Group
Moody’s France SAS
96 Boulevard Haussmann
Paris, 75008
France
JOURNALISTS: 44 20 7772 5456
Shopper Service: 44 20 7772 5454
Alain Laurin
Affiliate Managing Director
Monetary Establishments Group
JOURNALISTS: 44 20 7772 5456
Shopper Service: 44 20 7772 5454
Releasing Workplace:
Moody’s France SAS
96 Boulevard Haussmann
Paris, 75008
France
JOURNALISTS: 44 20 7772 5456
Shopper Service: 44 20 7772 5454
