Rating Rationale
November 29, 2019 | Mumbai
Credit Agricole Corporate and Investment Bank
Rating Reaffirmed 
 
Rating Action
Rs.500 Crore Certificate of Deposits Programme CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A1+' rating on the certificate of deposit programme of Credit Agricole Corporate and Investment Bank India (CACIB India), the Indian branch operations of Credit Agricole Corporate & Investment Bank (CACIB; formerly Calyon bank).
 
The rating on CACIB India continues to be driven by the ratings of S&P Global Ratings (S&P) on Credit Agricole S.A. (CASA; core bank of the group Credit Agricole [GCA]), which stands at 'A+/Stable/A-1'. CACIB is a subsidiary of CASA, the central entity under GCA. S&P's ratings on CASA and its core subsidiaries, including CACIB, reflect CASA's firm market leadership in the French retail banking, diversified business and income sources, and stable earnings. The ratings also factor in CASA's high systemic importance in France and high economic risk in Italy, the group's second home market.
 
The rating on CACIB India continues to reflect the support that the Indian branch is expected to receive from CACIB and its adequate capitalisation. These strengths are partially offset by small scale of operations, average earnings profile and asset quality.

Analytical Approach

CRISIL's rating on the Indian branch operations of CACIB continues to be driven by S&P's ratings on CASA.

Key Rating Drivers & Detailed Description
Strength
* Adequate capitalisation
CACIB India remains adequately capitalised as reflected in Tier I and overall capital adequacy ratio (CAR) of 10.26% and 12.74%, respectively, as on March 31, 2019 (11.47% and 14.80%, respectively, a year earlier). Furthermore, networth remains adequate for the current scale of operations at Rs 1,710 crore as on March 31, 2019 against Rs 1,550 crore a year earlier.

CRISIL believes the bank will maintain adequate capital position over the medium term and will raise capital from the head office as and when required.

Weaknesses
* Small scale of operations
CACIB India focuses on providing fee-based products such as foreign exchange, interest rate derivatives, trade financing, and debt market products. Lending operations continue to be on a small scale, with net advances of Rs 5,031 crore as on March 31, 2019 against Rs 3,888 crore a year earlier.

CRISIL believes the bank will improve its market position gradually but will remain a small player in the banking industry over the medium term.

* Average asset quality and profitability
Being a corporate financier, CACIB India has a chunky asset portfolio, with the top twenty borrowers constituting around 36% of the loan book as on March 31, 2019. Asset quality improved in the last fiscal, with gross non-performing assets (NPAs) decreasing to 0.06% as on March 31, 2019, from 9.10% a year earlier, partly driven by lower slippages and higher write-offs. However, the bank has already provided fully for all the NPAs and net NPAs was nil by the end of fiscal 2019.

The bank reported a profit of Rs 160 crore in fiscal 2019 compared to loss of Rs 270 crore in fiscal 2018. Consequently, return on assets (RoA) improved to 1.3% in fiscal 2019 from negative 2.5% in fiscal 2018, partly driven by lower credit cost (negative 75 basis points for fiscal 2019 compared to 3.17% for the previous fiscal) on account of provision write-back.

Liquidity: Superior
Liquidity remains superior, supported by excess SLR (statutory liquidity ratio) investments of around Rs 647 crore (12.7% of net demand and time liabilities) in securities, classified under the statutory liquidity ratio, as on March 31, 2019. Asset-liability profile is well-matched, with positive cumulative mismatches in maturity buckets of up to 1 year as on March 31, 2019. Liquidity coverage ratio was 164% for the quarter ended March 31, 2019, as against the regulatory requirement of 100%. Liquidity also benefits from access to systemic sources of funds, such as the liquidity adjustment facility from the Reserve Bank of India, and the call money market.

Rating sensitivity factors
Downward factors
* More than 2 category downgrade in the rating of CASA by S&P.
* Substantial and continuous weakening of asset quality and earnings profile.
About the Bank

CACIB is the capital markets and corporate financing arm of the Credit Agricole group, and is among the largest corporate and investment banking players in France. It has been present in India since 1981, and has five branches in the country. The Indian branches deal with large MNC's that already have global relationship with CACIB. 
 
In fiscal 2019, CACIB India reported a profit of Rs 160 crore on total income (net of interest expense) of Rs 234 crore against a loss of Rs 270 crore on total income (net of interest expense) of Rs 208 crore in the previous fiscal.

Key Financial Indicators
As on/for the period ended March 31 Unit 2019 2018
Total assets Rs crore 15,443 9,119 
Total income Rs crore 536 427 
Profit after tax Rs crore 160 (270) 
Gross NPA % 0.06 9.10
Overall capital adequacy ratio % 12.74 14.80
Return on assets % 1.30 (2.47)

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
 ISIN Name of instrument Date of allotment Coupon
rate (%)		 Maturity date Issue size
(Rs.Cr)		 Rating assigned  with outlook
NA Certificate of Deposits Programme NA NA 7-365 Days 500 CRISIL A1+
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Certificate of Deposits  ST  500.00  CRISIL A1+      22-11-18  CRISIL A1+  01-11-17  CRISIL A1+  25-07-16  CRISIL A1+  CRISIL A1+ 
                27-07-17  CRISIL A1+       
All amounts are in Rs.Cr.
Links to related criteria
CRISILs Approach to Financial Ratios
Rating Criteria for Banks and Financial Institutions
Rating Criteria for Finance Companies
CRISILs Criteria for rating short term debt
Mapping global scale ratings onto CRISIL scale

For further information contact:
Media Relations
 Analytical Contacts
 Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

 Krishnan Sitaraman
Senior Director - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 8070
krishnan.sitaraman@crisil.com

Subhasri Narayanan
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 3403
subhasri.narayanan@crisil.com

Suraj Das
Rating Analyst - CRISIL Ratings
CRISIL Limited
B:+91 22 3342 3000
Suraj.Das@crisil.com 		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL PRIVACY
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.

DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL