Banque et Caisse d'Epargne de l'Etat, Luxembourg

Our stable outlook on BCEE mirrors that on Luxembourg (AAA/Stable/A-1+). This reflects BCEE's status as a GRE and our expectation that the bank will keep its integral link with, and very important role for, the Luxembourg's government over our outlook horizon. We factor in our expectations that, despite the deteriorated economic environment, BCEE will sustain solid profitability in the next two years, supported in particular by low incurred credit losses, and that it will continue to monitor its capitalization at, or above, the current very high-level. We would lower the long-term rating on BCEE to 'AA' if we lowered the long-term rating on Luxembourg to 'AA+'. We might also consider a negative rating action if the relationship between BCEE and

...The Banque et Caisse d'Epargne de l'Etat, Luxembourg (BCEE) has a leading domestic retail banking franchise heavily focused on Luxembourg. BCEE ranks among the top three banks in Luxembourg. Its dominant home market position, particularly among households, is one of the bank's key business strengths, with a market share in the individual deposits and mortgage loans segments of around 40%-50%. Substantial efforts in improving its digital offer in recent years have supported the bank's customer-centric strategy, and we believe this digitization process will continue as customer demand for flexible contact channels increases. We view BCEE's profitability as steady, particularly in light of its moderate risk profile. BCEE enjoys strong customer relationships and a relatively diversified business model. While the deteriorated economic environment could weigh on its credit-risk provisioning, we expect the bank to deliver resilient earnings in 2022 on the back of solid interest and fee revenue,...

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