(The following statement was released by the rating agency)
PARIS/LONDON, February 06 (Fitch) Fitch Ratings has affirmed
Union de Banques
Arabes et Francaises (UBAF)'s Long-term Issuer Default Rating
(IDR) at 'BBB+'
with a Stable Outlook and its Viability Rating (VR) at 'bbb-'. A
full list of
rating actions is at the end of this rating action commentary.
KEY RATING DRIVERS - IDRs AND SUPPORT RATING
UBAF's IDRs and Support Rating are driven by potential support
Agricole Corporate and Investment Bank (CACIB, A/Stable; 47%
of Credit Agricole (CA; A/Stable). Fitch believes that timely
would be provided by CACIB, or ultimately by CA, if required, as
CACIB is UBAF's
designated reference shareholder. Fitch's assessment of support
also factors in
CA's history of support and UBAF's high integration with CACIB
in terms of
management and risk control.
The two-notch difference between CACIB's and UBAF's Long-term
Fitch's opinion that UBAF is of limited importance to CACIB. The
on UBAF's Long-term IDR mirrors that on CACIB and CA.
RATING SENSITIVITIES - IDRs AND SUPPORT RATING
UBAF's IDRs and Support Rating are sensitive to any change in
strategic importance to, or integration with CACIB, which is not
expectation. Any rating action on CACIB's Long-term IDR would
action on UBAF's Long-Term IDR.
KEY RATING DRIVERS - VR
The main drivers of UBAF's VR are the benefits in terms of risk
governance stemming from its strong integration with CACIB and
to the MENA region facilitated by the bank's ownership
structure, which includes
a large number of MENA shareholders. UBAF's VR also reflects its
quality despite the heightened political and economic risks in
the MENA region,
conservative credit risk management at the expense of
profitability and prudent
liquidity policies, but also its modest size and country and
UBAF's business is supported by its MENA shareholders. However,
the reduction of
trade finance business due to difficult operating environments
important countries of operation (such as Libya, Syria or
Egypt), tight credit
risk provisioning criteria, stricter liquidity requirements
(since 2012) and low
interest rate environment put pressure on the bank's operating
profit in 2013.
UBAF's asset quality is adequate. Non-performing loans (NPLs)
in 2013, as the bank sold old fully-reserved non-performing
exposures. Net NPLs
were estimated at a low 2% of Fitch core capital at end-2013. In
bank maintains a comfortable buffer of general provisions
against credit risk.
UBAF's liquidity is satisfactory. It is supported by large money
placements (largely with CACIB). Its flexible balance sheet
structure, which is
driven by self-liquidating short-term transactions, reduces
Fitch views UBAF's capitalisation (Fitch core capital ratio
estimated at 26% at
end-2013) as only adequate given concentrations on the asset
exposure to volatile markets, and the aggressive
RATING SENSITIVITIES - VR
The bank's VR could be downgraded if there was a material
deterioration in asset
quality or operational losses that could erode the bank's
capital position. A
shift toward higher risk appetite, greater asset
concentrations, less stringent
liquidity policies and looser operational and credit risk
controls could also
trigger a downgrade. However, this is not Fitch's expectation.
liability mismatch, increased funding concentration and
available liquidity could also put pressure on the bank's VR.
for UBAF's VR is limited given its niche focus and exposure to
The rating actions are as follows:
Long-term IDR affirmed at 'BBB+'; Outlook Stable
Short-term IDR affirmed at 'F2'
Support Rating affirmed at '2'
Viability Rating affirmed at 'bbb-'
Certificate of Deposit: affirmed at 'F2'
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Additional information is available on www.fitchratings.com
Applicable criteria, 'Global Financial Institutions Rating
Criteria', dated 31
January 2014, and 'Rating FI Subsidiaries and Holding Companies'
dated 10 August
2012 are available at www.fitchratings.com.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Rating FI Subsidiaries and Holding Companies
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