RCI Banque 'BBB/A-2' Ratings Affirmed Despite Renault Downgrade; Outlook Remains Negative
- We lowered our long-term rating on carmaker Renault S.A. to 'BB+/B' from 'BBB-/A-3' on April 9, 2020.
- Renault's captive finance bank, RCI Banque, has strong financial performance and capitalization, with less cyclical revenue than its parent. We expect it will maintain a robust financial profile as it navigates the COVID-19 pandemic.
- We are therefore affirming our 'BBB/A-2' long- and short-term issuer credit ratings on RCI Banque.
- The negative outlook indicates that we could lower the ratings on RCI in 2020-2021 if we take a similar action on Renault. It also continues to reflect the risk that the mixed financial performance of Renault's industrial activities and other group challenges could have negative contagion effects on RCI, notably regarding funding costs, access to capital markets, and operating performance.
PARIS (S&P Global Ratings) April 10, 2020--S&P Global Ratings said today it affirmed its 'BBB/A-2' long- and short-term issuer credit ratings on France-based RCI Banque (RCI) and its core subsidiary DIAC S.A. The outlooks on both entities remain negative. We also affirmed the issue ratings on all rated debt.
The affirmation follows a review of RCI after the downgrade of its sole parent, Renault S.A. (BB+/Negative/B). We believe that Renault and other global automakers will face intense credit pressures resulting from the COVID-19 pandemic and drastic measured to contain it. As stated in our previous outlooks, we now rate RCI two notches above its parent, due to the bank's more predictable and stable revenues than its more-cyclical parent.
The negative outlook indicates that we could lower the ratings on RCI in 2020-2021 if we take a similar action on Renault. This is because we maintain our view that RCI cannot be rated more than two notches above its parent. We could also lower the ratings if the bank's earnings capacity stopped outperforming similarly rated peers. This could be due to intensifying pressures on the auto market resulting from COVID-19 containment measures, or rising funding costs and difficult access to capital markets as a result of contagion risk from Renault.
A downgrade of Renault would entail a similar downgrade of RCI.
Irrespective of our rating on Renault, we could remove the notch of flexibility and lower the long- and short-term issuer credit ratings on RCI to 'BBB-/A-3' if contagion risks start to crystallize and affect RCI's access to debt markets, or cost of funding. This could be the case if the challenges faced by Renault or tensions within the alliance negatively affect RCI's operations and activities, notably regarding funding costs and strategic focus, or if the intense pressure we see in the auto market partly resulting from the COVID-19 pandemic, reduces RCI's profitability and new business volumes beyond our expectations.
We would revise the outlook to stable in 2020-2021 if we took a similar action on Renault and if our view of RCI's stand-alone creditworthiness remained unchanged and resilient to COVID-19 impacts and to challenges faced by the parent and the auto sector as a whole.
Related Criteria
- General Criteria: Group Rating Methodology, July 1, 2019
- Criteria | Financial Institutions | General: Risk-Adjusted Capital Framework Methodology, July 20, 2017
- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017
- Criteria | Financial Institutions | Banks: Bank Rating Methodology And Assumptions: Additional Loss-Absorbing Capacity, April 27, 2015
- Criteria | Financial Institutions | Banks: Quantitative Metrics For Rating Banks Globally: Methodology And Assumptions, July 17, 2013
- Criteria | Financial Institutions | Banks: Banks: Rating Methodology And Assumptions, Nov. 9, 2011
- Criteria | Financial Institutions | Banks: Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
- General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009
- Criteria | Financial Institutions | Banks: Commercial Paper I: Banks, March 23, 2004
Related Research
- French Automaker Renault Downgraded To 'BB+/B' On Weaker Metrics Due To COVID-19; Outlook Negative, April 9, 2020
- COVID-19 Will Batter Global Auto Sales And Credit Quality, March 23, 2020
- RCI Banque 'BBB/A-2' Ratings Affirmed Despite Renault CreditWatch Negative Placement; Outlook Negative, Feb. 20, 2020
- RCI Banque, Aug. 22, 2019
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