PARIS, February 07 (Fitch) Fitch Ratings has affirmed Agence
Developpement's (AFD) Long-term foreign and local currency
Ratings (IDRs) at 'AA+' with a Stable Outlook, and its
currency IDR at 'F1+'. A full list of rating actions is
The IDRs of AFD are underpinned by an implicit solvency
guarantee from the
French state (AA+/Stable/F1+), given its status as a public
agency (EPIC). They
also reflect AFD's strategic role as the main supplier of French
aid, a key foreign policy instrument.
KEY RATING DRIVERS
Fitch classifies AFD as a dependent public sector entity (PSE)
under its rating
of public sector entities criteria, due to its statutory
legal status, strategic importance to, and, to a lesser extent,
control by and
integration with the State. As a result the ratings of AFD are
and credit- linked to France's ratings.
AFD is the State's development bank. Its missions are defined by
and monitored by sponsor ministries (foreign affairs, finance,
overseas). The policy framework for French development aid was
last updated in
June 2013 and confirmed AFD's role as a central operator.
The State provides funding to AFD through loan guarantees,
and long-term loans. Fitch expects state funding to remain
stable in the medium
term as development aid is protected from the French
government's spending cuts.
Fitch expects AFD's outstanding loans in 2013 to have grown at a
pace similar to
the 19.4% seen in 2012. This is in line with AFD's business plan
of EUR8bn of
new commitments per year, which could lead to the balance sheet
doubling in size
by 2020. Business growth in 2012 was almost entirely due to
lending to foreign countries. Of its outstanding loans 92.4%
were contracted at
AFD's own risk at end-2012, focusing on Africa and the Middle
commitments reached EUR8.95bn at end-1H13, of which 87.6% were
granted at AFD's
own risk. At end-1H13, AFD benefited from EUR1.79bn of explicit
from the State.
Net results totalled EUR112m in 2012 and Fitch expects
profitability to remain
stable in 2013. AFD benefited from low borrowing costs and loan
charges, despite prudent provisioning. Its cost/income ratio
reflecting its narrow interest margin, the cost of its agencies'
the importance of higher-cost advisory services provided to
Strong asset growth has weakened AFD's capital ratios since
remains sound, but the regulatory capital ratio declined to 19%
in 2012, from
29.14% in 2010. Core Tier 1 ratio is expected to have declined
to 9.3% in 2013,
from 10.2% in 2012. AFD intends to broaden its eligible capital
base so that
lending growth remains compatible with regulatory capital
believe the State will ensure AFD has the means to implement its
while maintaining safe capital ratios.
AFD enjoys solid liquidity, underpinned by its long-term funding
its strong capital base. Short-term funding comprises EUR2bn
deposits and a EUR25bn EMTN programme. At end-1H13, AFD had a
liquidity buffer in EUR1.64bn of available-for-sale securities
held-to-maturity securities. As a public agency, AFD has access
support from the French Treasury.
A rating action on the Republic of France would be reflected in
AFD's ratings. A
change in AFD's legal status that weakens potential support from
the state would
lead to a downgrade.
The rating actions are as follows:
- Long-term IDR: affirmed at 'AA+'; Outlook Stable
- Short-term IDR: affirmed at F1+
- EUR25bn EMTN programme: affirmed at 'AA+'/'F1+'
- EUR2bn certificates of deposits programme: affirmed at 'F1+'
- Senior unsecured notes: affirmed at 'AA+'
- Subordinated notes: affirmed at 'AA'
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Applicable criteria, "Tax-Supported Rating Criteria", dated 14
August 2012 and
Public Sector Entities - Outside the United Statesâ€� dated 4
March 2013, are
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