FCA Bank SpA 'BBB/A-2' Ratings Affirmed After Fine For Cartel Allegations; Outlook Negative

  • On Jan. 9, 2019, the Italian antitrust authority fined FCA Bank SpA €179 million due to allegations that almost all automotive captive banks operating in Italy formed a cartel and unlawfully exchanged information on leasing and auto financing conditions between June 2003 and April 2017.
  • We believe that FCA Bank will be able to absorb the fine with no material impact on its capital position.
  • Consequently, we are affirming our 'BBB' long-term and 'A-2' short-term issuer credit ratings on FCA Bank.
  • The outlook remains negative, mirroring the negative outlook on Italy.
MILAN (S&P Global Ratings) Jan. 11, 2019--S&P Global Ratings said today that 
it affirmed its 'BBB' long-term and 'A-2' short-term issuer credit ratings on 
FCA Bank SpA. The outlook remains negative. 

The affirmation reflects our expectation that FCA Bank's high earning capacity 
will be sufficient to absorb the €179 million fine it has received from the 
Italian antitrust authority with limited impact on its overall solvency. The 
fine, which the bank will appeal, was due to allegations that almost all 
automotive captive banks operating in Italy formed a cartel and unlawfully 
exchanged information on leasing and auto financing conditions between June 
2003 and April 2017. The penalty imposed on FCA Bank is part of an overall 
€678 million sanction. The affirmation also reflects FCA Bank's flexibility to 
adapt its dividend policy to preserve its capitalization. Specifically, we 
expect that FCA Bank will retain its 2018 earnings in full as it will not 
upstream any dividends to its shareholders. This should allow the bank to 
maintain its risk-adjusted capital ratio slightly above 10.5% in 2020 despite 
the fine. 

We do not expect that the result of the Italian antitrust authority's 
investigation will materially affect FCA Bank's future business because most 
of its competitors have faced the same allegations and charges (see "FCE Bank, 
RCI Banque, And VW Bank Have Ample Capital And Earnings To Absorb Fines From 
Italian Competition Authority," published Jan. 11, 2019). Consequently, we do 
not anticipate a major impact on FCA Bank's reputation that could affect its 
future revenues. Still, we will monitor any future developments or any legal 
implications that this issue might have.

In our view, FCA Bank remains a strategically important subsidiary of Credit 
Agricole S.A. (CASA), its 50% owner, and consequently would benefit from 
CASA's support if needed. The flexible dividend policy supports our view. 

The negative outlook on FCA Bank over our horizon of the next 24 months 
mirrors that on Italy. We consider FCA Bank to be a strategically important 
subsidiary for CASA. We cap ratings uplift for group support for strategically 
important entities at the level of the rating on their sovereign. In FCA 
Bank's case, this reflects our opinion that potential extraordinary support 
from CASA will not be sufficient to allow FCA Bank to withstand a sovereign 
default stress scenario.

Absent a sovereign downgrade, a downward revision of FCA Bank's stand-alone 
credit profile due to a deterioration in the financing conditions for Italian 
banks that hits FCA Bank's profitability and internal capital generation would 
not lead us to lower the ratings on FCA Bank. This is because we would 
incorporate an additional notch of support from CASA, given our view of FCA 
Bank's importance for the French group.

We would revise the outlook to stable if we revised the outlook on Italy to 
stable.