DBRS Morningstar Confirms SFIL’s Senior Ratings at AA (high), Trend Changed to Negative

DBRS Ratings GmbH (DBRS Morningstar) confirmed the ratings of SFIL SA (SFIL or the Bank), including the Long-Term Issuer Rating of AA (high) and the Short-Term Issuer Rating of R-1 (high). The trend on the Long-Term ratings has been changed to Negative from Stable whilst the Trend on the Short-Term ratings remains Stable. The Support Assessment remains SA1. A full list of rating actions is included at the end of this press release.

KEY RATING CONSIDERATIONS
The confirmation of SFIL’s Long-Term Issuer Rating at AA (high) and the change of Trend to Negative follows DBRS Morningstar’s confirmation of the Republic of France’s Long-Term Foreign and Local Currency rating at “AAA” with a Negative Trend on April 17, 2020. SFIL’s ratings reflect its statutory ownership and the expectation of predictable support from its shareholders, all of whom are ultimately owned by the French state. As a result, DBRS Morningstar’s support assessment for SFIL is SA1 which implies the expectation of predictable support from its shareholders.

RATING DRIVERS
Given the recent change of Trend, an upgrade is unlikely. Given the already high rating level stemming from the high likelihood of support from the French State, an upgrade would require additional comfort in relation to potential support from the State.

Given the strong link with the French State, a downgrade could occur from a deterioration in the ratings of France or from a weakening in the likelihood of support.

RATING RATIONALE

SFIL is a public development bank focusing on two public policy missions, public-sector financing and export credit agreement refinancing. SFIL owns 100% of the Caisse Française de Financement Local (CAFFIL), through which it refinances medium and long-term loans offered by la Banque Postale in partnership with the Caisse des Dépôts et Consignations to French local authorities and French Public hospitals.

The Bank is ultimately owned 100% by the French State, with 75% direct ownership and 25% indirect ownership through the Caisse des Dépôts et Consignations (CDC) and La Banque Postale which are both100% state-owned. DBRS Morningstar considers that there is a strong likelihood that the French State would support SFIL because we understand the French Republic – as the reference shareholder - is committed to ensuring that SFIL is able to pursue its activities in an ongoing manner and to honour its financial commitments.

Discussions have started between the French State and the CDC to transfer the ownership of SFIL to the CDC. We do not consider that this transfer will materially impact SFIL’s ratings, as the Bank would remain entirely owned by the French State. In addition, such a transfer would come with a commitment of the shareholders to ensure SFIL’s financial strength, to protect its economic base and to provide necessary support for the continuation of SFIL’s activities.

ESG CONSIDERATIONS

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in EUR unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (11 June 2019) https://www.dbrsmorningstar.com/research/346375/global-methodology-for-rating-banks-and-banking-organisations.

The sources of information used for this rating include Company Documents, SFIL SA Annual Report 2019 and S&P Global Market Intelligence. DBRS Morningstar considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS Morningstar does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar's outlooks and ratings are under regular surveillance.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

The sensitivity analysis of the relevant key rating assumptions can be found at: https://www.dbrsmorningstar.com/research/359927

Ratings assigned by DBRS Ratings GmbH are subject to EU and U.S. regulations only.

Lead Analyst: Arnaud Journois, Vice President – Global Financial Institutions Group
Rating Committee Chair: Ross Abercromby, Managing Director– Global Financial Institutions Group
Initial Rating Date: September 10, 2018
Last Rating Date: August 29, 2019

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Tel. +49 (69) 8088 3500
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Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

For more information on this credit or on this industry, visit www.dbrsmorningstar.com.