OREANDA-NEWS. Fitch Ratings has affirmed Paris-based Amundi's Long-Term Issuer Default Rating (IDR) at 'A+', Short-Term IDR at 'F1' and Support Rating at '1'. The Outlook on Amundi's Long-term IDR is Stable.

These rating actions were undertaken as part of Fitch's global peer review of traditional investment managers. For more information on the peer review, refer to the commentary "Fitch Completes Traditional Investment Manager Global Peer Review" dated 9 June 2016.

Amundi is the parent holding company of Amundi group, one of Europe's largest asset management companies established in 2010. It has a leading franchise in French and European fixed income products; at end-March 2016, 50% of its EUR987bn assets under management (AuM) related to bonds and a further 19% to money market products. It also has growing franchises in equities (12% of AuM, multi assets (12%) and real assets and alternatives (7%)).

Following an initial public offering of 23% of its share capital in late 2015, Amundi was at end-March 2016 75.5% owned by Credit Agricole (CA, A/Positive/F1/a). The majority of this stake (74.2%) is held by Credit Agricole S. A. (CA S. A.; A/Positive/F1), the publicly listed company and central body of CA. See also "Fitch: Continued Access to Networks Means Amundi's IPO Rating-Neutral", published 10 November 2015 and available on www. fitchratings. com).

KEY RATING DRIVERS

Amundi's IDRs are based on Fitch's standalone assessment of the company. The ratings reflect Amundi's leading domestic and growing international franchise, which is supported by continued access to strong distribution networks, and adequate net asset flows supporting average AuM. The ratings also reflect Amundi's strong revenue generation, sound risk management, adequate asset performance and low adjusted balance sheet leverage.

However, the ratings also take into account the sensitivity of Amundi's earnings and AuM base to market volatility, reliance on the distribution networks of CA and previous minority shareholder Societe Generale (SocGen, rated A/Stable/a) and above-average reliance on fixed income products.

Amundi's franchise is supported by CA's and SocGen's retail banking (accounting for 10% of AuM at end-March 2016) and insurance (41% of AuM) distribution networks. However, recent net inflows in external distribution networks (eg international networks including joint ventures, institutional and sovereign mandates) have outstripped growth in CA/SocGen networks, which should over time strengthen Amundi's standalone franchise. In 1Q16, net flows were sound at EUR13.8bn and well-balanced by asset class.

Overall asset performance was adequate in 2015 with good one - and three-year performances in many fixed income and equity products although to varying degrees with respect to asset class and region. Seed money exposure declined significantly in 2015 but remains higher than at most comparable peers. Fitch believes that risks in this portfolio are limited as exposures mostly relate to low-risk money market funds and are further mitigated by Amundi's sound risk control framework, which is centralised and integrated into CA's risk function.

Reflecting increasing average AuM, Amundi's earnings generation and profitability remained sound in 2015 and 1Q16, with an operating margin of 46% in 2015, remaining at the upper end of the peer group. Profitability also benefitted from cost efficiency; Amundi's compensation/operating revenue ratio remained broadly flat in 2015 at 34%. While the outlook for traditional investment management in 2016 remains challenging, due to pressure on asset valuations, among others, we expect Amundi to continue reporting broadly stable profitability.

Amundi's capitalisation and leverage metrics remained solid at end-2015. Balance sheet leverage, calculated as tangible equity-to-tangible assets, was better than sector average at 34% and benefitted from the absence of significant third-party debt as funding is almost exclusively sourced from CA. Amundi's gross cash flow leverage (gross debt/EBITDA; 2.8x at end-2015) is weaker than peers', but this figure becomes -0.36x when it is adjusted for Amundi's structured products issuance (where proceeds are on-lent to CA with matching terms) and net positive interbank position (also largely with CA) and compares well with peers.

Amundi's Short-Term IDR of 'F1' reflects the company's sound standalone liquidity but also the Short-Term IDR of CA, as the provider of Amundi's back-stop liquidity. Market and liquidity risks are moderate. However, Amundi's guaranteed products and structured products issuance activities mean that sound liquidity management is crucial for the overall risk profile.

The Stable Outlook reflects Fitch's view that Amundi will continue to report sound profitability while maintaining acceptable gross and net balance sheet leverage.

SUPPORT RATING AND SUPPORT RATING FLOOR

Amundi's Support Rating of '1' reflects our view that support from CA for Amundi is extremely likely, if ever required.

As the manager of CA's insurance assets as well as an important provider of asset management products for CA's retail networks, we view Amundi as a core subsidiary for CA, which fits well into CA's asset-gathering strategy. In addition, compared with the more balance sheet-heavy banking activities that CA pursues, Amundi's business model only requires limited amounts of regulatory capital and liquidity, resulting in superior risk-adjusted returns. This also means that required resources to support Amundi, if ever needed, would be limited compared with CA's overall size.

RATING SENSITIVITIES

Amundi's IDRs are at the upper end of the peer group and upside is therefore limited in the medium-term. However, further improvements outside the company's already dominant European fixed income franchise, a more consistent asset performance across asset classes while maintaining current leverage and capitalisation levels would be positive for Amundi's credit profile.

Downside to Amundi's ratings is currently also limited but could arise from sustained asset performance leading to net money outflows, a markedly increased risk appetite for seed capital or higher external leverage. A sizeable operational or reputational loss could also put downward pressure on ratings.

Since Amundi's IDRs are based on Fitch's stand-alone assessment of the company, an upgrade of CA would not lead to an upgrade of Amundi's Long-Term IDR. Similarly, a downgrade of CA's ratings would not automatically trigger a downgrade of Amundi's ratings but would nonetheless put pressure on Amundi's Long-Term IDR given the close integration between the two entities in terms of risk and liquidity management as well as Amundi's reliance on CA's distribution network.

SUPPORT RATING AND SUPPORT RATING FLOOR

The Support Rating is sensitive to a change in the assumptions around the propensity or ability of CA to provide timely support for Amundi. This may arise, for instance, if the importance of savings products in CA's overall strategy diminishes or if CA's Long-Term IDR is downgraded by two or more notches, both considered unlikely by Fitch.