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)

  • CREDIT AGRICOLE CUT 1 LEVEL TO A+ FROM AA- BY FITCH    :ACA FP

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 DOWNGRADES CREDIT AGRICOLE TO 'A+'; OUTLOOK STABLE
 
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 www.fitchratings.com) 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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redpill's picture

Everyone take a shot of Rum Agricole!

 

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

nope-1004's picture

Another one to bite the dust.

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

Ancona's picture

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

FranSix's picture

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

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!

chorus:

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 

(chorus)

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


(chorus)


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?


(chorus)


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


(chorus)


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

pop

 

 

CClarity's picture

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

MobBarley's picture

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

 

 

 

HedgeAccordingly's picture

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

gold bounce tomorrow? http://hedge.ly/shWwRh

NumberNone's picture

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

Tsar Pointless's picture

FFFrance, you're on deck!

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

FranSix's picture

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

 

http://watch.bnn.ca/#clip585632

kengland's picture

Huge rally starting tomorrow on this news. Book it

navy62802's picture

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

Bay of Pigs's picture

Enjoy it while it lasts.

Like walking on the Sun...

no life's picture

Arrest these guys already!

Iriestx's picture

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

NoMoreBull's picture

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

Sudden Debt's picture

Nonde un Sarkozy! La merde!

slewie the pi-rat's picture

headwinds up the ass, BiCheZ!

Matt's picture

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

slaughterer's picture

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

GOSPLAN HERO's picture

Too many female dogs on this site.

yabyum's picture

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

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.

Ratscam's picture

don't forget the Swissy banks uups

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. 

falak pema's picture

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

rwethereyet's picture

But their ATM's are still working right.

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.

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. 

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.

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.   

Caviar Emptor's picture

Race to the bottom: we downgrade ourselves. Retaliation expected 

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.

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