RCI Banque

The stable outlook on RCI incorporates our view that the bank's financial risk profile will remain strong, with robust risk-adjusted profitability and continued conservative capital management over the next two years. Furthermore, an upgrade or downgrade of Renault (BB+/Stable/B), all else being equal, would not automatically entail a similar rating action on RCI. We could downgrade the bank if Renault's creditworthiness comes under 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. To raise our

...RCI Banque's profitability remains resilient to the current macro environment. The bank has strong fundamentals, with one of the industry's lowest cost-to-income ratios of 33.45% in 2022, and a return on average common equity (ROAE) of 11.8% in the same year--among the highest of 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, and sluggish growth in Europe). As an auto-captive, RCI's offering is more concentrated than commercial banks, but more geographically diversified than peers'. The starting point for assigning our rating on the bank is the '###' anchor, which is lower than that on purely domestic banks and reflects RCI's meaningful geographic diversification across Europe and in countries such as Brazil with, on average, higher economic risks than those we perceive for France. We see RCI's concentration in car financing and dealer exposures as...

Full Report