RCI Banque

The stable outlook on RCI incorporates our view that the bank's financial risk profile will remain strong, with steady risk-adjusted profitability and continued conservative capital management over the next two years. Furthermore, a downgrade of Renault (BB/Negative/B) would not automatically entail a similar rating action on RCI. We could downgrade the bank if Renault's creditworthiness comes under further material pressure and RCI is unable to maintain its strong financial risk profile. In particular, we could consider a downgrade if the bank's capitalization is no longer a strength, with risk-adjusted capital (RAC) falling sustainably below 10%, or if contagion risks from Renault start affecting RCI's access to debt markets or cost of funding. An upgrade could happen only if Renault's creditworthiness

...RCI Banque's profitability remains strong, despite the weak autocycle induced by pandemic-related restrictions and supply shortages, and should remain resilient to the adverse implications of the current macro environment. The bank has strong fundamentals, with one of the industry's lowest cost-to-income ratios of 31% in 2021, and a return on average common equity (ROAE) of 13.6% in the same year--one of the highest among auto-captive peers and European banks. We expect the bank will experience limited fallout from the adverse implications of the current macro environment (inflation, rising interest rates, supply chain disruptions, sluggish growth in Europe, and the Russia-Ukraine military conflict) and note that it has fully provisioned (101.4 million) its equity investment in the Russian joint venture (JV; RN Bank) at the end of June 2022. Its remaining exposure relates to its equity investment in RNL Leasing, amounting to a marginal amount of about 2 million. S&P Global Ratings sees...

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