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Fitch Upgrades Agos Ducato to 'A-'; Outlook Stable
May 31, 2017 / 11:03 AM / 6 months ago

Fitch Upgrades Agos Ducato to 'A-'; Outlook Stable

(The following statement was released by the rating agency) MILAN/LONDON, May 31 (Fitch) Fitch Ratings has upgraded Agos Ducato's (Agos) Long-Term Issuer Default Rating (IDR) to 'A-' from 'BBB+', Short-Term IDR to 'F1' from 'F2' and Support Rating (SR) to '1' from '2'. The Outlook on the Long-Term IDR is Stable. The rating action follows the recent upgrade of Agos's direct and ultimate parents CA Consumer Finance (CACF)'s and Credit Agricole's (CA) Long-Term IDRs to 'A+'/Stable from 'A'/Positive (see also 'Fitch Upgrades Credit Agricole to 'A+'; Stable Outlook' available at KEY RATING DRIVERS Agos's ratings are driven by support from majority shareholder, CACF (A+/Stable/F1), and ultimately from CA (A+/Stable/F1/a+/5). CACF holds a 61% stake in Agos, with the remaining 39% owned by Italy's third largest banking group, Banco BPM. The rating upgrade reflects CACF's and CA's now stronger ability to support their Italian consumer finance subsidiary. The two-notch difference between the Long-Term IDRs of Agos and CACF reflects Agos's majority but not full ownership by CACF and Fitch's view that Agos is not a core but a strategically important subsidiary in a strategically important country for the CA group. The Stable Outlook on Agos's Long-Term IDR mirrors that of CA's and CACF's. Agos has now completed its turnaround and access to former Banco Popolare's extensive distribution network contribute to our assessment of support since Agos increasingly contributes to CACF's results while credit risk is kept under reasonable control. Funding from CA accounts for a majority of Agos's non-equity funding, despite an emphasis on funding diversification and the parent has helped support the subsidiary's capitalisation through capital increases. Fitch rates Agos two notches above Italy's sovereign rating (BBB/Stable) since Agos has no direct exposure to Italian sovereign risk and Fitch believes it is less exposed to the risk of restrictions being imposed on its ability to service its obligations than, for example, deposit-taking banks, if Italy's operating environment materially worsens. Fitch upgraded Agos's Short-Term IDR to 'F1', the higher of the two possibilities for a 'A-' Long-Term IDR under our criteria, to reflect our view that the propensity of its, higher-rated, ultimate parent to provide support is more certain in the near term. RATING SENSITIVITIES Agos's ratings remain primarily sensitive to changes in Fitch's assumptions regarding the ability and propensity of CACF, and ultimately of CA, to provide support. A downgrade of CA's and CACF's IDRs would likely result in a downgrade of Agos's IDR, reflecting a weakening of their ability to support a strategically important subsidiary. An upgrade of CA's and CACF's IDRs could result in an upgrade of Agos's Long-Term IDR if the Italian operating environment does not deteriorate and if Agos's exposure to Italian sovereign risk remains limited. Agos's attractiveness to CA could be sensitive to a significant economic deterioration in Italy if this results in a material negative impact on Agos's asset quality and capitalisation. Agos's ratings could therefore be downgraded following a downgrade of Italy's sovereign if the latter is driven primarily by a deterioration in the domestic economic environment. The notching difference between Agos's and CACF's IDRs could narrow if CACF significantly increases its stake in Agos above the 61% it currently holds while remaining committed to Italy as a strategic market. Conversely, Agos's ratings would come under pressure if Italy becomes a less strategically important market for CA, which could arise if the operating environment in Italy sees material deterioration. Agos is the fourth-largest consumer finance company in Italy in terms of new volumes financed (9.7% at end-2016) and CACF's largest subsidiary outside France. Contact: Primary Analyst Francesca Vasciminno Senior Director +39 02 87 90 87 225 Fitch Italia S.p.a. Vicolo Santa Maria alla Porta, 1 20123, Milan Secondary Analyst Silvana Gandolfo Associate Director +44 20 3530 1301 Committee Chairperson Christian Kuendig Senior Director +44 20 3530 1399 Media Relations: Stefano Bravi, Milan, Tel: +39 02 879 087 281, Email:; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on Applicable Criteria Global Non-Bank Financial Institutions Rating Criteria (pub. 10 Mar 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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