TEXT-Fitch rates ZAO Credit Agricole 'BBB+'; outlook stable

Thu Dec 20, 2012 4:42am EST

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(The following statement was released by the rating agency)

Dec 20 - Fitch Ratings has assigned Russia-based Credit Agricole CIB ZAO (ZAO CA), a 100% subsidiary of Credit Agricole banking group (CA; A+/Negative), Long-term foreign and local currency Issuer Default Ratings (IDRs) of 'BBB+' and a Support Rating of '2'. The Long-term IDRs have Stable Outlooks. A full list of rating actions is at the end of this comment.

RATING ACTION RATIONALE AND DRIVERS: IDRS, NATIONAL RATING, SUPPORT RATING

ZAO CA's IDRs, National and Support Ratings reflect the high probability of support from CA. Fitch's assessment of potential support takes into account CA's full ownership of ZAO CA, the high level of management and operational integration, common branding and the very low cost of potential support, in case of need, given the insignificant share of the Russian entity in CA's total assets. However, ZAO CA's Long-term IDRs are constrained at the level of Russia's Country Ceiling, which is currently three notches below CA's Long-term IDR.

Fitch classifies ZAO CA as a subsidiary of 'limited importance' for CA, given its very small size relative to the group and the limited overall importance of emerging Europe subsidiaries for CA's operations. ZAO CA's ratings are therefore likely to remain at least two notches below those of its ultimate parent, even if the differential between CA's ratings and the Russian Country Ceiling narrows.

RATING SENSITIVITES: IDRS, NATIONAL RATING, SUPPORT RATING

ZAO CA's ratings could be downgraded if (i) the Russian Country Ceiling is downgraded, together with Russia's sovereign ratings; (ii) CA is downgraded by more than one notch; or (iii) CA sells ZAO CA to a more lowly-rated owner, or Fitch changes its view of the willingness of the parent to support the subsidiary. However, Fitch does not currently anticipate any of these scenarios. If the Russian Country Ceiling was upgraded and CA's rating remained at the 'A+' level, ZAO CA's Long-term IDRs may be upgraded by one notch, to 'A-'.

RATING ACTION RATIONALE: VIABILITY RATING

Fitch has not assigned ZAO CA a Viability Rating (which reflects a bank's standalone strength) due to its high dependence on the parent. This is reflected in the bank's limited domestic franchise (most clients are subsidiaries of multinational clients of the group), high operational integration with the parent, the parent's involvement in risk decisions and guarantees provided by CA on ZAO CA's credit exposures.

The rating actions are as follows:

Long-term foreign and local currency IDRs: assigned 'BBB+'; Outlook Stable

Short-term foreign and local currency IDRs: assigned 'F2'

National Long-term rating: assigned 'AAA(rus)'; Outlook Stable

Support Rating: assigned '2'

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