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Fitch Downgrades Credit Agricole To A+, Outlook Stable

Tyler Durden's picture


Turns out it is not France. Instead, it is its most insolvent bank (although with SocGen and BNO around, who really knows)


As a reminder, it is our hypothesis that it was none other than Credit Agricole who was bailed out by the coordinated central bank action two weeks ago: "Dollar Libor Market Hints 66x Leveraged Credit Agricole Was Bank X"

Full report:

Fitch Ratings-Paris/London-14 December 2011: Fitch Ratings has downgraded Credit Agricole's (CA) Long-term Issuer Default Rating (IDR) to 'A+' from 'AA-' and its Viability Rating to 'a+' from 'aa-' and simultaneously removed them from Rating Watch Negative (RWN). The Outlook on the Long-term IDR is Stable. Fitch has also downgraded certain entities of the group. A full list of rating actions is at the end of this comment.
The rating actions should be viewed in conjunction with a broader review of the larger and relatively highly rated European banks in Fitch's rating portfolio (see 'Fitch Downgrades Five Major European Commercial Banks and Banking Groups'
dated 14 December 2011 at and reflect stronger headwinds facing the banking industry as a whole. Factors that were a main consideration for the rating actions on CA include: exposure to the eurozone problems; impact on funding of capital markets that are not functioning effectively; and only adequate capital ratios compared with highly rated peers. CA's Long-term IDR, which is driven by its intrinsic creditworthiness as measured by its Viability Rating, continues to reflect the group's dominant French retail franchise, solid asset quality, limited market risk and solid funding and liquidity.
While CA's exposure to the Greek sovereign is low, it has significant exposure to non-sovereign risk through its Greek subsidiary, Emporiki (EUR21bn at end-June 2011), whose asset quality is poor (impaired loan ratio of 31%). As Emporiki has a large local deposit base and uses ECB funding, CA's funded exposure was EUR8bn at end-September 2011. CA also has exposure to the Italian sovereign (EUR6.7bn at end-September 2011) as well as non-sovereign risk through a retail bank, Cariparma, and a consumer finance subsidiary, Agos Ducato. Asset quality remains manageable, but the loan book is likely to deteriorate and impairments are likely to rise as the economy slows.
Given the more difficult access to funding, especially in USD, CA announced it will de-leverage its balance sheet and increase the proportion of long- vs.
short-term funding (targeted reduction of long-term debt by EUR5bn, short-term by EUR45bn by end-2012). This means that the group will have to reduce its activities (especially in Corporate and Investment Banking), which will lead to a reduced franchise and lower revenue. In addition, increasing the proportion of long-term financing will increase average funding costs, which have already risen in line with those of the banking industry as a whole. The loss of business and higher funding costs will weigh on CA's profits, which have never been one of the group's strengths, although this will be partially compensated by a reduction in expenses.
CA's Fitch Core Capital ratio is not at the top of its peer group range. The difference between CA's Fitch Core Capital ratio and its Core Tier 1 regulatory ratio is largely due to the treatment of the group's insurance subsidiary. Fitch deducts the insurance subsidiary's net asset value from Fitch Core Capital, whereas CA deducts the capital held in the insurance business from total capital. Nevertheless, CA's lower capital ratio is mitigated by its above-average coverage ratio of impaired loans. In addition, the capital deduction related to the insurance subsidiaries could decrease if CA decided to introduce some leverage in its insurance activities.
Hybrid capital instruments remain on RWN pending the completion of Fitch's review of how it rates bank regulatory capital as explained in the exposure draft "Rating Bank Regulatory capital Securities" published on 28 July 2011.


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Wed, 12/14/2011 - 17:31 | 1980526 redpill
redpill's picture

Everyone take a shot of Rum Agricole!


Next up is Grey Goose, and then probably a nice Belgian beer.

Wed, 12/14/2011 - 17:33 | 1980549 nope-1004
nope-1004's picture

Another one to bite the dust.

Too bad those stress tests were so off.... who da thunk?

Wed, 12/14/2011 - 17:42 | 1980587 Ancona
Ancona's picture

HAHA! You've been rehypothecated motherfucker! Who's your daddy now?

Wed, 12/14/2011 - 17:46 | 1980607 FranSix
FranSix's picture

No problem.  You simply visit the Apothecary for a poultice, a fire cup, and a blood letting.

Wed, 12/14/2011 - 18:00 | 1980658 SHEEPFUKKER

A+ is good right?

Wed, 12/14/2011 - 18:21 | 1980744 The Peak Oil Poet
The Peak Oil Poet's picture



Flippin' Houses (for Aussies)


When everybody watches prices heading for the moon
The urge to buy is like the piper man has played his tune
And all of us rush in and borrow every cent we can
Why be too late? It's mad to wait! Let's buy it off the plan!


Flippin' houses, Flippin' houses
Flippin' Flats in Condo Heaven
Let's all buy six or seven
We'll all be millionairs!

Some clever banker figured out a way banks couldn't lose
They'd make a it on the fees each way (and land-laws they'd abuse)
They'd bundle, tranch, get tripple A's and boast their quality
And bet against the very shit they sold to you and me 


The US housing bubble crashed and trillions disappeared
Economists they scratched their heads and thought it all quite weird
Old Greenspan he'd backed down from pressure when he'd caught a wiff
While "housing crash" Rubini cried and so did Peter Schiff


The Old World followed soon enough and Iceland crashed and burned
Then all the PIGS they followed suit and so their bonds were spurned
The Euro? Well i guess it's dead good riddance i suggest
Until they each go separate ways what madman would invest?


And China? What a total joke! Their madness trumps us all
They bid up prices none could pay and now we watch them fall
The engine of the world it seems is headed down the drain
And everywhere and everyone will join them in their pain


But we'll be right mate here in Aus - we're different don't you know
Our land is better land than theirs our thinking's not so slow
You can not lose investing in our city CBDs
And even world depression will not bring us to out knees

Flippin' houses, Friggin' houses
all my dreams are shot to hell
all my money's gone as well
horseshit's worth more than my shares




Wed, 12/14/2011 - 18:28 | 1980760 CClarity
CClarity's picture

How can any French bank have an "A" at all?  Any time soon? Even with nationalization . . . 

Wed, 12/14/2011 - 18:55 | 1980860 MiguelitoRaton
MiguelitoRaton's picture

Downgrade Fitchez

Wed, 12/14/2011 - 19:02 | 1980893 redpill
redpill's picture

Clever, Miguel!

Wed, 12/14/2011 - 19:23 | 1980962 MiguelitoRaton
MiguelitoRaton's picture

Danke pill

Wed, 12/14/2011 - 18:00 | 1980660 MobBarley
MobBarley's picture

Too much blood inflames the humours and leads to post coital returgidation.




Wed, 12/14/2011 - 17:42 | 1980591 HedgeAccordingly
HedgeAccordingly's picture

but S&P doenst matter.... tell that to 6E - 

gold bounce tomorrow?

Wed, 12/14/2011 - 18:48 | 1980835 NumberNone
NumberNone's picture

Fuck Agricola...their commercials suck and they don't do shit for a sore throat. 

Wed, 12/14/2011 - 17:29 | 1980529 Tsar Pointless
Tsar Pointless's picture

FFFrance, you're on deck!

Wed, 12/14/2011 - 17:29 | 1980530 papaswamp
papaswamp's picture

Bunches of downgrades bitchez..

  • Rabobank cut to AA; outlook stable
  • OP Pohjola cut to A=; outlook stable
  • Danske Bank cut to A; outlook negative
  • BFCM cut to A; outlook stable
  • Credit Agricole to A= from AA-; outlook stable

Wed, 12/14/2011 - 17:30 | 1980536 FranSix
FranSix's picture

OT:  Sino-forest turns out to be the 'goose egg'

Wed, 12/14/2011 - 17:31 | 1980542 SheepDog-One
SheepDog-One's picture

OMFG bullish!!

Wed, 12/14/2011 - 17:31 | 1980545 PicassoInActions
PicassoInActions's picture

will euro go down?

Wed, 12/14/2011 - 17:32 | 1980547 kengland
kengland's picture

Huge rally starting tomorrow on this news. Book it

Wed, 12/14/2011 - 17:38 | 1980568 navy62802
navy62802's picture

We'll probably see even more weakness in gold, as these banks continue their last ditch efforts to raise capital.

Wed, 12/14/2011 - 17:41 | 1980582 J 457
J 457's picture

Huge USD rally.

Wed, 12/14/2011 - 17:44 | 1980594 Bay of Pigs
Bay of Pigs's picture

Enjoy it while it lasts.

Like walking on the Sun...

Wed, 12/14/2011 - 17:36 | 1980563 navy62802
navy62802's picture


Wed, 12/14/2011 - 17:37 | 1980566 no life
no life's picture

Arrest these guys already!

Wed, 12/14/2011 - 17:39 | 1980577 Iriestx
Iriestx's picture

Jim Cramer has personally told me that this is extremely bullish for equities.

Wed, 12/14/2011 - 19:17 | 1980946 NoMoreBull
NoMoreBull's picture

Cramer went to DEFCON 2 last night....and tonight is suggesting strongly investors raise cash.  Whatever!

Wed, 12/14/2011 - 17:40 | 1980579 Sudden Debt
Sudden Debt's picture

Nonde un Sarkozy! La merde!

Wed, 12/14/2011 - 17:41 | 1980583 slewie the pi-rat
slewie the pi-rat's picture

headwinds up the ass, BiCheZ!

Wed, 12/14/2011 - 17:42 | 1980588 FranSix
FranSix's picture

OT:  Canada's fiscal austerity measures in the 1990's:

Wed, 12/14/2011 - 17:47 | 1980614 Matt
Matt's picture

And in the end, their solution was to sell all the gold and only hold USD as reserves instead. Brilliant.

Wed, 12/14/2011 - 17:48 | 1980617 FranSix
FranSix's picture

I know, eh?

Wed, 12/14/2011 - 17:42 | 1980590 slaughterer
slaughterer's picture

Phew.  What a relief.  Just Fitch.  Just Credite Asshole.  

Wed, 12/14/2011 - 17:43 | 1980593 GOSPLAN HERO
GOSPLAN HERO's picture

Too many female dogs on this site.

Wed, 12/14/2011 - 17:47 | 1980613 yabyum
yabyum's picture

Tons of bitches here bro, but without the dead spots on the lawn.

Wed, 12/14/2011 - 17:44 | 1980598 Milton Waddams
Milton Waddams's picture

Okay, they lost an a, but at least they replaced that pesky minus sign with a plus. That's gotta count for something.

Wed, 12/14/2011 - 17:47 | 1980610 Ratscam
Ratscam's picture

don't forget the Swissy banks uups

Wed, 12/14/2011 - 17:49 | 1980620 chump666
chump666's picture

France is next.  Sarkocksy, Germany won't help ya. They will be busy/panicking to re-cap their banks on the Greek/PIIGS leaving the EU.

Take the pain. 

Wed, 12/14/2011 - 18:33 | 1980774 falak pema
falak pema's picture

don't be a chump...we're ALL next...

Wed, 12/14/2011 - 17:51 | 1980624 rwethereyet
rwethereyet's picture

But their ATM's are still working right.

Wed, 12/14/2011 - 17:52 | 1980632 crazyv
crazyv's picture

The deleveraging is not a bad thing - and unlike 2008 is not an uncontrolled event. Contrast the actions of the CB - then the idiotic Fed made banks tender for liquidity limiting the amount they would provide. This time around at least they have learned something and have expanded the collateral they will accept and are providing unlimited liquidity at a fixed price.

But as all these institutions begin to delever what exactly will go by the wayside - nothing that the real economy couldn't do without. Gone will be the billions of dollars in repo/reverse repo books seeking to make a tiny fraction on huge leverage, perhaps it will also mean that some the HFT trading will decline, etc. Maybe this will return the financial system to what it should be - an enabler of the real economy not an end in it self. As long as the CB continue to accept good quality C&I loans as collateral with small haircuts those loans will be made- in fact the banks will have no option but to make them since their default position - buying government bonds is no longer an option.

Wed, 12/14/2011 - 18:01 | 1980664 Caviar Emptor
Caviar Emptor's picture

You mean the taxpayer lends at 0.5% to banks that then lend to consumers at 15%. 

That's the way to "fix" the economy! 

Bottom line: none of the debts can be repaid. Not with contracting net worth, real incomes, employment, business margins, retirement assets and expanding CPI (3.5%), cost of raw materials, education, insurance, banking fees, legal fees, taxes, healthcare, cost of home ownership, transportation. 

Wed, 12/14/2011 - 17:57 | 1980637 tempo
tempo's picture

Tanks in the Street...The head of Italty's largest trade union said today there is extreme anger and social unrest coming on proposed austerity measures and pension reform. Could this ever happen to the quiet streets in CA or NY???   yesterday, Gov Brown of CA announced a $3 billion shortfall in CA budget (probably $5 billion) and it was also released that CA pension funds face a $500 billion funding deficits up $100 billion from last year.   No problem...Tx will fund CA deficits.

Wed, 12/14/2011 - 18:31 | 1980771 Things that go bump
Things that go bump's picture

Wait until the cops find out their pensions are going poof.  I expect to see a rediscovery of the old protection racket.  We will remember the Mafia fondly; these boys don't have their ethics.   

Wed, 12/14/2011 - 17:57 | 1980648 Caviar Emptor
Caviar Emptor's picture

Race to the bottom: we downgrade ourselves. Retaliation expected 

Wed, 12/14/2011 - 17:59 | 1980652 chump666
chump666's picture

Asia will be brutalised on open.  They will go nuts buying USD, sink equities and commodities.  Very doomy.  Something bad is brewing.   Perfect storm between EZ endgame and China crash, with US in the middle and maybe a war.

AUD 99 handle about to go.

Wed, 12/14/2011 - 18:03 | 1980670 Caviar Emptor
Caviar Emptor's picture

Reuters: China to slap import duties on US autos

Wed, 12/14/2011 - 18:02 | 1980667 chump666
chump666's picture

and this is a worry:

  • China to levy duties on imported US autos calimign dumping
  • China’s Trade Minister Chen: sees possibility of trade protectionism getting more serious next year, global market might contract in 2012
  • Trsy Brainard: important for China to stop managing exchange rate
  • USTR: significant problems with China’s anti-dumping probe of US car imports
Wed, 12/14/2011 - 18:04 | 1980681 Caviar Emptor
Caviar Emptor's picture

Satellite spots China first aricraft carrier at sea

Wed, 12/14/2011 - 18:15 | 1980704 Melin
Melin's picture

it floats?  Or did you mean, "in the" sea?

Wed, 12/14/2011 - 18:46 | 1980827 NumberNone
NumberNone's picture

I think we have some video of the new ship getting launched...  

Wed, 12/14/2011 - 18:16 | 1980728 RobD
RobD's picture

Heh, let me know when they actually fly something off that pig. Would love to be there when they try to land something, should be quite spectacular lol.

Wed, 12/14/2011 - 18:34 | 1980778 Things that go bump
Things that go bump's picture

Or perhaps quite a spectacle.

Thu, 12/15/2011 - 00:18 | 1982082 Nobody For President
Nobody For President's picture

No aircraft on deck - yet.

Wed, 12/14/2011 - 18:37 | 1980794 moskov
moskov's picture

What are you always talking about China? Who are you?

Wed, 12/14/2011 - 18:05 | 1980682 falak pema
falak pema's picture

well all these banks : Citi, BofA, the famous 4 french, the German, ital, spanians and Brits, all belly up, all distributing mega bonuses to Chief Sitting Bulls; now sweating like Corzine; are uber alles until they fall; mighty paper tigers of  fiat empires.

I would love to have a hand shake with one of these guys; look him deep in his eye balls and see sheer emotion like in Cape Fear. More likely they are immune to self reproach, having worn imperial purple they think they are uber-alles and beyond plebian rebuke.

Wed, 12/14/2011 - 18:08 | 1980697 kito
kito's picture

this is very bad for the world. france has been an invaluable contributor to society. without them we wouldnt have the following:

french fries

french bread

french toast

french kissing

french dressing

french horns

french hens

french braids

clearly society and culture will stagnate should the french collapse..we must not let this happen...............

Wed, 12/14/2011 - 18:37 | 1980730 slewie the pi-rat
slewie the pi-rat's picture

never fear, kito!

my ratings portfolio is as follows:

Banque de Europoon has been upgraded to:  well, you can see how sensitive the market is to these evaluations...

  • our poon bangue is seen to be sitting on ample reserves and assets
  • responds to digital stimulation
  • appropriate liquidity
  • this is investment-grade poon
  • lever up, BiCheZ!
  • L0L!!!
Wed, 12/14/2011 - 18:16 | 1980732 Melin
Melin's picture

you forgot:

french maids

Wed, 12/14/2011 - 18:26 | 1980755 slewie the pi-rat
slewie the pi-rat's picture


Wed, 12/14/2011 - 18:13 | 1980713 hugovanderbubble
hugovanderbubble's picture

Enjoy Xmas season everyone.


Wed, 12/14/2011 - 18:30 | 1980767 slewie the pi-rat
slewie the pi-rat's picture


thxz, hugo!

3 french hens and 8 maids-a-milking to you, too!

Wed, 12/14/2011 - 18:21 | 1980735 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Only one notch?  These banks, all banks, Europe and US, are  bankrupt!

Fuck bank stocks/bonds.

Buy silver.

Wed, 12/14/2011 - 19:06 | 1980907 itstippy
itstippy's picture

Bingo.  Much ado about nothing. 

There isn't a single European bank that should rate higher than "C-".  What a farce...

Wed, 12/14/2011 - 18:26 | 1980757 blu
blu's picture

Why would they down-grade CredAg when they've just been recently bailed out? I would have thought a bail-out would be like the Good Housekeeping Seal of Approval. TBTF status is supposed grant them a halo or something.

Maybe Fitch didn't get the memo.

Wed, 12/14/2011 - 18:34 | 1980775 stocktivity
stocktivity's picture

looks like 4 more downgrades just announced -

Wed, 12/14/2011 - 19:05 | 1980903 Eireann go Brach
Eireann go Brach's picture

A+...then Greece must be A-

Wed, 12/14/2011 - 19:24 | 1980970 Snakeeyes
Snakeeyes's picture

Italy Sovereign Yields Rise, Greece Not Making Progress - IMF's LaGarde Promoted to General in the French Foreign Legion

Wed, 12/14/2011 - 20:30 | 1981241 navy62802
navy62802's picture

"outlook stable" - Here's a clue. Nothing in Europe is stable right now. At a minimum it should be "outlook uncertain." I'd go so far as to say "outlook negative" until the Europe situation is "resolved."

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