Fitch Affirms BNP Paribas' IDR at 'A+'; Outlook Stable

Thu May 16, 2013 4:11pm EDT

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(The following statement was released by the rating agency) LONDON/PARIS, May 16 (Fitch) Fitch Ratings has affirmed BNP Paribas' (BNPP) Long-term Issuer Default Rating (IDR) at 'A+' with a Stable Outlook and Short-term IDR at 'F1+'. At the same time, the agency has affirmed the bank's Viability Rating (VR) at 'a+', Support Rating Floor at 'A+' and Support Rating at '1'. A full list of rating actions is at the end of this rating action commentary. The rating actions have been taken in conjunction with Fitch's Global Trading and Universal Bank (GTUB) periodic review. Fitch's outlook for the sector is stable. Positive rating drivers include improved liquidity, funding, capitalisation and more streamlined businesses, all partly driven by regulation. Offsetting these positive drivers are substantial earnings pressure, regulatory uncertainty and heightened legal and operational risks. KEY RATING DRIVERS - LONG-TERM IDR, VR AND SENIOR DEBT The bank's Long-term IDR with a Stable Outlook, VR and senior debt ratings are driven by its business diversification, sound franchises in European retail banking and corporate and investment banking (CIB), an ability to generate satisfactory earnings through different cycles, adequate funding and liquidity as well as satisfactory capitalisation. The ratings also take into account earnings volatility from capital markets activities, although this is far less important to BNPP's business model than at most of its GTUB peers. Further negative rating drivers are a high gross impaired loans ratio and significant exposure to risk in Italy. RATING SENSITIVITIES - LONG-TERM IDR, VR AND SENIOR DEBT Significant asset quality deterioration, for example linked to BNPP's Italian exposure, consumer lending, or unexpected problems from CIB, could lead to a downgrade of its VR. In addition, the bank's Fitch Core Capital ratio will need to remain at least at 9%-10% post-Basel III for BNPP to keep its current VR. Fitch does not expect to upgrade BNPP's VR in the near term. KEY RATING DRIVERS - SHORT-TERM IDR, SUPPORT RATING AND SUPPORT RATING FLOOR BNPP's Short-term IDR, Support Rating and Support Rating Floor reflect Fitch's opinion that, given BNPP's systemic importance, both domestically and internationally, there is an extremely high probability that support from the French authorities would be forthcoming, if required. RATING SENSITIVITIES - SHORT-TERM IDR, SUPPORT RATING AND SUPPORT RATING FLOOR The bank's Short-term IDR, Support Rating and Support Rating Floor are sensitive to any change in assumptions around the French state's ability (as reflected in its ratings) or willingness to provide timely support to BNPP. A downgrade of France's Long-term IDR by one notch (to 'AA+') would lead to a downgrade of BNPP's Support Rating Floor to 'A' and Short-term IDR to 'F1'. This would not have any impact on the bank's Long-Term IDR, which is driven by BNPP's VR. The Support Rating and Support Rating Floor are also sensitive to a change in Fitch's assumptions around the availability of sovereign support for the French banks. There is a clear political intention to ultimately reduce the implicit state support for systemically important banks in Europe and the US, as demonstrated by a series of policy and regulatory initiatives aimed at curbing systemic risk posed by the banking industry. This might result in Fitch revising Support Rating Floors downwards in the medium term, although the timing and degree of any change would depend on developments with respect to specific jurisdictions. In this context, Fitch is paying close attention to ongoing policy discussions around support and 'bail in' for eurozone banks. Until now, senior creditors in major global banks have been supported in full, but resolution legislation is developing quickly and the implementation of creditor "bail-in" is starting to make it look more feasible for taxpayers and creditors to share the burden of supporting large, complex banks. KEY RATING DRIVERS AND SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Subordinated debt and other hybrid capital issued by BNPP and BNP Paribas US Medium-Term Notes Programme LLC are all notched down from BNPP's VR in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles, which vary considerably. Their ratings are primarily sensitive to any change in BNPP's VR. KEY RATING DRIVERS AND SENSITIVITIES - SUSBIDIARY AND AFFILIATED COMPANY The Long-and Short-term IDRs and Support Rating of the group's French subsidiary, BNP Paribas Securities Services, are based on an extremely high probability of support from BNPP if needed and are therefore sensitive to changes in BNPP's IDRs. The ratings of this subsidiary could also be sensitive to changes in its strategic importance to the rest of the group. BNP Paribas Arbitrage Issuance BV, BNP Paribas US Medium-Term Notes Programme LLC and BNP Paribas Finance Inc are wholly owned financing subsidiaries of BNPP whose debt ratings are aligned with that of BNPP based on an extremely high probability of support if required and whose ratings are sensitive to the same factors that might drive a change in BNPP's IDR. The rating actions are as follows: BNPP Long-term IDR: affirmed at 'A+'; Stable Outlook Short-term IDR: affirmed at 'F1+' Viability Rating: affirmed at 'a+' Support Rating: affirmed at '1' Support Rating Floor: affirmed at 'A+' Short-term debt: affirmed at 'F1+' Long-term senior debt: affirmed at 'A+' Market linked securities: affirmed at 'A+emr' Subordinated debt (lower Tier 2): affirmed at 'A' Upper Tier 2: affirmed at 'BBB+' Hybrid capital: affirmed 'BBB' BNP Paribas Securities Services: Long-term IDR: affirmed at 'A+'; Stable Outlook Short-term IDR: affirmed at 'F1+' Support Rating: affirmed at '1' BNP Paribas Arbitrage Issuance BV Long-term senior debt: affirmed at 'A+' Market linked securities: affirmed at 'A+emr' BNP Paribas Finance Inc. Commercial paper: affirmed at 'F1+' BNP Paribas US Medium-Term Notes Programme LLC Short-term debt: affirmed at 'F1+' Long-term senior debt: affirmed at 'A+' Market linked securities: affirmed at 'A+emr' Subordinated debt: affirmed at 'A' Contact: Primary Analyst Alain Branchey Senior Director +33 1 44 29 91 41 Fitch France S.A.S 60 rue de Monceau, 75008 Paris Secondary Analyst Francois-Xavier Marchand Associate Director +33 1 44 29 91 46 Committee Chairperson Gordon Scott Managing Director +44 20 3530 1075 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com; Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 15 August 2012; 'Evaluating Corporate Governance', dated 12 December 2012 and 'Assessing and Rating Bank Subordinated and Hybrid Securities' dated 5 December 2012 are available at www.fitchratings.com. Applicable Criteria and Related Research Global Financial Institutions Rating Criteria here Evaluating Corporate Governance here Assessing and Rating Bank Subordinated and Hybrid Securities here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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