DBRS Morningstar Confirms Crédit Agricole and Upgrades Creval’s Ratings After Completion of Offer

DBRS Ratings GmbH (DBRS Morningstar) confirmed the ratings of Groupe Crédit Agricole (CA or the Group), including the Long-Term Issuer Rating of AA (low) and the Short-Term Issuer Rating of R-1 (middle). At the same time, DBRS Morningstar upgraded the ratings of Credito Valtellinese SpA (Creval or the Bank), including the Long-Term Issuer Rating to A (high), from BB (high), and the Short-Term Issuer Rating to R-1 (middle), from R-3. The trend on all ratings is Stable. DBRS Morningstar has maintained CA’s Intrinsic Assessment at AA (low) and the support assessment at SA3, changed Creval’s support assessment to SA1 from SA3, and withdrawn Creval’s Intrinsic Assessment. Today’s rating actions follow the conclusion of CA’s voluntary public tender offer in cash for all the ordinary shares of Creval. A full list of rating actions is included at the end of this press release.

KEY RATING CONSIDERATIONS

On April 23, 2021, Groupe Crédit Agricole published the final results of the public tender offer for Creval made by its core subsidiary in Italy, Crédit Agricole Italia (CA Italia). The all-cash offer was made at EUR 12.270 per share, ex dividend. In addition, a dividend of EUR 0.230 per share will be paid on April 28, 2021 by Creval, bringing the total amount for the offer to EUR 855 million. With the conclusion of the offer , CA Italia now owns more than 91% of Creval’s share capital. The acquisition of Creval is largely neutral for CA’s ratings. It strengthens CA's position in Italy, the Group's second domestic market, by increasing its size and market shares for loans and deposits. With the acquisition, the combined entity will become the seventh largest bank by total assets in Italy, with a domestic market share of around 5%. In addition, it reinforces the Group's presence in Lombardy, doubling the market share to more than 6%.

Following the acquisition, DBRS Morningstar considers Creval as an important banking subsidiary of CA Italia, and a critical element in CA’s strategy to expand in Italy. This is a key consideration underpinning the upgrade of Creval’s ratings. As a result, the SA1 support assessment for Creval considers DBRS Morningstar’s expectation that CA has the willingness and ability to support Creval, if required. Furthermore, DBRS Morningstar expects Creval to be merged and fully integrated into CA Italia by 2022. In line with DBRS Morningstar’s Global Methodology for Rating Banks and Banking Organisations, Creval’s ratings are now positioned one notch below those of Groupe Crédit Agricole.

We view the execution risks as being manageable considering CA Italia's track record of successful integrations as demonstrated by recent acquisitions, which should facilitate the integration process and reduce execution risks.

RATING DRIVERS
An upgrade of CA’s Long-Term Issuer Rating would occur should CA substantially improve profitability and efficiency over the medium term, whilst maintaining a resilient credit profile.

The ratings would be downgraded if CA experiences a prolonged material deterioration of its asset quality profile. Ratings would also be downgraded if the Group’s profitability materially declines.

Following the acquisition of Creval by CA and given the SA1 designation, Creval’s ratings will generally move in tandem with CA’s ratings. An upgrade would require an upgrade of CA’s ratings.

Similarly, a downgrade of Creval’s ratings could result from a downgrade of CA’s ratings.

ESG CONSIDERATIONS

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

The Grid Summary Grades for Groupe Crédit Agricole are as follows: Franchise Strength – Very Strong / Strong; Earnings Power – Strong/Good; Risk Profile – Strong; Funding & Liquidity – Strong; Capitalisation – Strong.

Notes:
All figures are in EUR unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (June 8, 2020) https://www.dbrsmorningstar.com/research/362170/global-methodology-for-rating-banks-and-banking-organisations. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021) https://www.dbrsmorningstar.com/research/373262/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883

The sources of information used for this rating include Company Documents, CA 2020 Report, CA 2020 Press Release; Creval 2020 Press Release, CA 2020 Presentation, Creval 2020 Presentation, CA 2020 Registration Document, CA Press Release about Offer Conclusion (April 23, 2021), CA Presentation about the acquisition (November 23, 2020) 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.

With respect to FCA and ESMA regulations in the United Kingdom and European Union, respectively, Groupe Crédit Agricole’s rating is an unsolicited credit rating. This credit rating was not initiated at the request of the issuer.

With Rated Entity or Related Third-Party Participation: YES
With Access to Internal Documents: NO
With Access to Management: NO

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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

The sensitivity analysis of the relevant key rating assumptions can be found at: https://www.dbrsmorningstar.com/research/377752

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Arnaud Journois, Vice President – Global Financial Institutions Group
Rating Committee Chair: Ross Abercromby - Managing Director - Global FIG
Initial Rating Date: July 13, 2010
Last Rating Date: September 28, 2020

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