Morningstar DBRS Confirms Groupe Crédit Agricole's Long-Term Issuer Rating at AA (low), Stable Trend

DBRS Ratings GmbH (Morningstar DBRS) confirmed its credit ratings on Groupe Crédit Agricole (CA or the Group) and Crédit Agricole S.A. (CASA), including the Long-Term Issuer Ratings at AA (low) and the Short-Term Issuer Ratings at R-1 (middle). The trends on all credit ratings remain Stable. Morningstar DBRS uses CA or the Group to refer to the organisation as a whole when discussing its franchise, operations, and strategies. Morningstar DBRS has confirmed the Group's Intrinsic Assessment at AA (low) and Support Assessment at SA3, meaning that timely systemic support is not expected. Morningstar DBRS views CASA's credit risk as intertwined with the credit risk of the Group. CASA's Support Assessment is SA1, meaning that CASA's ratings are primarily driven by the internal support provided by the parent. A full list of credit rating actions is included at the end of this press release.

KEY CREDIT RATING CONSIDERATIONS
The confirmation of CA's credit ratings continues to reflect the Group's very strong retail banking, commercial banking, and insurance franchise in its domestic market. CA also owns the largest asset managers in Europe. The franchise is further supported by its Italian operations and various specialised financial services. CA's risk profile is conservative, benefitting from the Group's substantial share of low-risk home loans in France and prudent underwriting standards. Morningstar DBRS notes that CA's asset quality metrics have remained resilient despite a number of economic challenges in recent years. The Group's funding and liquidity profile also remain very strong, benefitting from stable customer deposits and good access to wholesale markets, while its capitalisation levels are robust with capital cushions substantially above minimum requirements and comparing favourably with many peers.

The credit ratings also consider that CA's profitability is lower than that of similarly rated peers. However, its universal banking model contributes to resilient earnings throughout the cycle and helps maintain a robust underlying capacity to generate capital. Morningstar DBRS expects the current market environment, including volatility in capital markets, high equity valuations, and the current rate environment, to support CA's earnings. Morningstar DBRS expects factors such as trade tensions and still high long-term rates to weigh on economic growth in CA's footprint, which could adversely affect business volumes and asset quality, but believes that positive drivers outweigh these risks.

The Group's Intrinsic Assessment of AA (low) has been assigned at the midpoint of the Intrinsic Assessment Range, as Morningstar DBRS views CA's credit fundamentals and performance as commensurate with those of similarly rated peers.

CREDIT RATING DRIVERS
Morningstar DBRS would upgrade its long-term credit ratings on CA should the Group substantially improve its profitability over the medium term while maintaining a resilient credit profile.

Conversely, Morningstar DBRS would downgrade its long-term credit ratings if CA experiences a prolonged material deterioration in its risk profile or profitability.

CREDIT RATING RATIONALE
Franchise Combined Building Block Assessment: Very Strong/Strong
With total assets of EUR 2.6 trillion, CA is one of the largest banking groups in Europe. CA's franchise is underpinned by its universal banking model, supported by its leading positions in retail banking and insurance in France and in asset management in Europe. Specialised financial services support the Group's universal banking model, which focuses on synergies and cross-selling. CA's retail networks in France generate around half of the Group's banking revenues. While the Group is concentrated in France, other businesses, including Asset Gathering, International Retail Banking, Specialised Financial Services, and Large Customers, are more international and increase diversification and support the strength of the Group's universal banking model. CA serves more than 54 million customers globally and is present in 46 countries. In France, CA is the largest retail bank with a leading market share of around 30% in household loans in 2024. The strength of CA's domestic franchise reflects the extensive presence of its co-operative and regional banks, which have a nationwide retail network in France.

Earnings Combined Building Block Assessment: Good/Moderate
CA's earnings metrics are weaker than those of similarly rated peers. However, Morningstar DBRS considers that the large and highly diversified revenue streams, which support a high degree of earnings stability, are a result of the Group's universal banking model. CA reported a net income (group share) of EUR 8.6 billion in 2024, up from EUR 8.3 billion in 2023 on higher revenues, partly offset by somewhat higher operating expenses, cost of risk, and taxes. Revenue growth in the Large Customers and Asset Gathering segments offset weakness in Retail Banking and Specialised Financial Services, benefitting from volatility and strong capital markets. Overall, CA has benefitted less from higher rates when compared with its international peers, which is related to the pricing regulation in French retail banking. At 6.26%, the 2024 return on equity (ROE) as calculated by Morningstar DBRS was also lower than average peer group ROE. This is partly because of higher-than-average capital levels and partly because of geographic and product exposure. However, Morningstar DBRS considers the high resilience of CA's results throughout the cycle. In Q1 2025, the reported net income before taxes for the Group was up 1.6% year over year (YOY) at EUR 3.4 billion, but its net income was down 9.2% YOY, driven by the impact of an additional corporate tax of EUR 207 million. This additional tax together with higher operating expenses outpaced the revenue growth, while loan loss provisions also increased somewhat.

Risk Combined Building Block Assessment: Strong/Good
CA's main risk is credit risk, accounting for 85% of CA's risk-weighted assets at the end of Q1 2025. Morningstar DBRS views CA's asset quality as solid and in line with its European peers. The Group's credit risk profile is relatively conservative reflecting the co-operative foundations of its retail banking business. Lending is primarily focused on the domestic market, with 67% of the loan book in France. Retail exposures account for 45% of the loan book, consisting in large part of generally low-risk home lending. CA also operates in some higher-risk business lines such as consumer finance or its Italian operations. Morningstar DBRS views CA's asset quality as solid, with a nonperforming loan ratio of 2.2% and cost of risk of 28 basis points (bps) in 2024 (as calculated by Morningstar DBRS). Consumer finance is showing some signs of weakening, but the Italian are improving consistently. However, factors such as a sluggish economy across CA's footprint, still elevated interest rates, and trade tensions could still to lead to a rise in defaults.

Funding and Liquidity Combined Building Block Assessment: Strong
Morningstar DBRS views CA's funding profile as solid, benefitting from the Group's leading position in the French savings market. Within the Group, there are a number of internal funding mechanisms. For instance, CASA has access to half of the Regional Banks' special savings and term deposits. The Regional Banks must also deposit their surpluses from other deposits with CASA. The Group also has good access to wholesale funding. In Q1 2025, 66.1% of CA's banking cash balance sheet (banking business balance sheet after netting of items that have a symmetrical impact on assets and liabilities) was funded by customer balances, which have seen consistent growth in recent years. According to Morningstar DBRS' calculation, the loan-to-deposit ratio at the end of Q1 2025 was 102%, down slightly from a year earlier. CA maintains a solid buffer of high-quality assets and reported a liquidity coverage ratio (12-month average) of 139% at the end of Q1 2025.

Capitalisation Combined Building Block Assessment: Strong/Good
Morningstar DBRS views CA's capitalisation as strong, and its capital ratios compare very favourably with most domestic and international peers. This is driven by the Group's high earnings retention, overall moderate risk exposures, and substantial cushions above the regulatory requirements. The Group has continued to increase its buffers for the regulatory capital ratios. At the end of Q1 2025, the Group's phased-in CET1 ratio was 17.6%, providing the Group with a cushion of 778 bps above the Supervisory Review and Evaluation Process requirements, one of the highest amongst European banks. At the end of Q1 2025, the phased-in total capital ratio and leverage ratio also remained strong at 21.8% and 5.6%, respectively.

Further details on the Scorecard Indicators and Building Block Assessments can be found at https://dbrs.morningstar.com/research/389493/.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May 2025) at https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (23 May 2025), https://dbrs.morningstar.com/research/454637. In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings, https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The sources of information used for these credit ratings include Morningstar, Inc. and company documents. Other sources include Crédit Agricole 2024 and Q1 2025 Credit Updates, Crédit Agricole 2024 and Q1 2025 Presentations, and Crédit Agricole 2024 Universal Registration Documents and Updates. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

With respect to FCA and ESMA regulations in the United Kingdom and European Union, respectively, these are unsolicited credit ratings. These credit ratings were 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

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

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are under regular surveillance.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

The sensitivity analysis of the relevant key credit rating assumptions can be found at: https://dbrs.morningstar.com/research/458852/.

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

Lead Analyst: Sonja Forster, Senior Vice President
Rating Committee Chair: Vitaline Yeterian, Senior Vice President, Sector Lead
Initial Rating Date: 18 January 2011
Last Rating Date: 19 July 2024

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