OREANDA-NEWS. Fitch Ratings has affirmed Caisse des Depots et Consignations' (CDC) Long-term Issuer Default Rating (IDR) at 'AA' and Short-term IDR at 'F1+'. The Outlook is Stable, mirroring that on the Republic of France's Issuer Default Rating (AA/Stable/F1+). A full list of rating actions is at the end of this comment.

The affirmation reflects the unchanged links between CDC and the French state since our last review, including no change in our expectations of strong extraordinary support from the state and the strategic importance CDC has for the French state.

KEY RATING DRIVERS
CDC is credit-linked to France under Fitch's 'Rating of Public Sector Entities - Outside the United States' criteria top down-approach. This is in light of the strong likelihood of extraordinary support from its sponsor of its status as a special agency (etablissement special) and CDC's importance for the French public sector.

CDC has fully state-controlled special agency status, which is unique in France. However, Fitch considers the French state is bound to provide support to CDC and that it has the legal and financial means to enable it to timely meet its debt service obligations pursuant to Law 80-539 on French public establishments. Consequently, its IDRs are aligned and move in tandem with those of the French sovereign.

CDC is closely monitored by the French state, notably through its supervisory board. Although CDC is not a bank and therefore is not obliged to declare capital adequacy ratios, ACPR, France's bank regulator, gives its opinion of CDC's capital adequacy.

Among its functions, CDC manages most of the regulated savings deposits (notably Livret A) collected by French banks, administers several public pension schemes and the deposits of the legal professions. CDC is also the institutional custody account manager of ACOSS (commercial paper and Euro CP rating: F1+), the French social security agency. CDC's long-term strategy focuses on economic development, housing, infrastructure - including lending to social housing, local governments and healthcare entities- and the energy transition.

On 25 August 2015, the French President announced that CDC will back Agence Francaise de Developpement (AFD; AA/Stable/F1+), the state's development bank. Although details are not yet available we believe that this would not have a significant impact on the links between the French state and CDC as AFD is an industrial and commercial public agency (EPIC) also credit-linked to the French state.

CDC operates in sectors such as insurance, postal services - through its 26% stake in La Poste (A+/Stable/F1), financial support - notably through a 50% stake in Bpifrance SA and a 20% stake in Societe de Financement Local (SFIL; AA-/Stable/F1+)- as well as in leisure, services, real estate and affordable housing through its subsidiaries - notably Societe Nationale Immobiliere (SNI; AA-/Stable/F1+) and its strategic participations - and private equity. CDC also has stakes in large listed French companies. At year-end 2014, CDC's consolidated assets related to the general section were EUR149.6bn, of which EUR96.7bn was in securities.

Fitch considers CDC's profitability tends to be volatile notably due to its large equity portfolio and yields on fixed-income securities. In 2014, CDC posted a consolidated net profit of EUR1.8bn, slightly below the EUR2.1bn net profit it recorded in 2013. CDC's 2014 consolidated net profit includes EUR327m of non-recurring items, which correspond to capital gains on the sale of securities.

Sizeable reserves (on CDC's social accounts) and stable outstanding deposits from the legal professions - amounting to EUR39bn as of September 2015 - sustain CDC's solid liquidity profile. CDC's liquidity needs are also largely covered by a EUR30bn global commercial paper programme and a EUR20bn Certificates of Deposit programme. CDC's strong overall standalone liquidity is also underpinned by EUR243.5bn funding collected on saving accounts (accounted in the Savings Funds Division), and its equity portfolio (EUR11.7bn at year-end 2014).

RATING SENSITIVITIES
The ratings could be downgraded if there are changes to CDC's legal status that weaken potential support from the state. A downgrade of France would also be reflected by CDC's ratings.

The ratings could be upgraded if the state provides an unconditional, first-demand guarantee of CDC's liabilities. CDC's ratings would also be upgraded if France was upgraded.

The rating actions are as follows:
- Long-term IDR: affirmed at 'AA'; Outlook Stable
- Short-term IDR: affirmed at 'F1+'
- EUR18.5bn EMTN programme: affirmed at 'AA'/F1+'
- EUR1.5bn BMTN programme: affirmed at 'AA'
- EUR20bn CD programme: affirmed at 'F1+'
- EUR30bn global CP programme: affirmed at 'F1+'
- Senior unsecured notes: affirmed at 'AA'