OREANDA-NEWS. Fitch Ratings has affirmed Le Credit Lyonnais's (LCL) Long-Term Issuer Default Rating (IDR) and senior debt ratings at 'A', Short-Term IDR at 'F1', and Viability Rating (VR) at 'a-'. The Outlook on the Long-Term IDR is Positive.

At the same time, Fitch has withdrawn the ratings. Fitch is withdrawing the ratings for commercial reasons. A full list of rating actions is available at the end of this rating action commentary.

KEY RATING DRIVERS

IDRS, SENIOR DEBT AND SUPPORT RATINGS

LCL's Long - and Short-Term IDRs, as well as the senior debt ratings, are equalised with those of Credit Agricole (CA, A/Positive/F1) and those of CA's central body, Credit Agricole S. A. (CA S. A., A/Positive/F1), which holds 95% of LCL's shares. The rating alignment reflects Fitch's opinion that LCL is a core subsidiary of CA given its ownership structure and integration with its parent.

LCL's Support Rating of '1' reflects Fitch's opinion of an extremely high probability of support for LCL from CA S. A., and in turn from CA, if required. The Positive Outlook on LCL's Long-Term IDRs reflects that on CA's.

VR

LCL's VR of 'a-' reflects the bank's moderate franchise in France, retail-driven business model, moderate risk appetite, adequate capitalisation and satisfactory funding.

LCL focuses on profitable domestic retail banking in urban areas, as well as providing services to SMEs and larger corporates. In response to the low interest rates and intense competition in the housing loan market in France, LCL is further strengthening its customer relationships and increasing cross-selling, including products from the group.

Maintaining net income in 2016 compared with 2015 will be a challenge. Margin pressure and high volumes of loan renegotiations have led to lower revenues so far in 2016. This is counterbalanced by ongoing cost containment measures and low loan impairment charges. LCL's cost-to-income ratio is higher than most French peers', but overall profitability is healthy.

LCL's risk appetite is moderate, as reflected in the bank's fairly stable asset quality, with lower impaired loans than most of the French universal banks. Prudent underwriting standards and a retail focus support LCL's loan quality, and over half of the loan book is to French households, mostly in the form of housing loans.

Customer deposits form the bulk of LCL's funding and are largely retail, with a limited need for wholesale funding. Liquidity is managed at group level and healthy. Capital is also managed at CA level and the dividend payout ratio is high. LCL's capital ratios are adequate, considering the bank's sound risk profile, healthy asset quality and low exposure to market risk. Fitch expects further improvement, similar to that at the group level, as demonstrated by an increase in the Tier 1 and total capital ratios over 2015.

RATING SENSITIVITIES

IDRS, SENIOR DEBT AND SUPPORT RATINGS

Not applicable

VR

Not applicable

The rating actions are as follows:

Le Credit Lyonnais

Long-Term IDR: affirmed at 'A', Outlook Positive and withdrawn

Short-Term IDR: affirmed at 'F1' and withdrawn

Viability Rating: affirmed at 'a-' and withdrawn

Support Rating: affirmed at '1' and withdrawn

Senior Debt: affirmed at 'A' and withdrawn

Certificate of deposit: affirmed at 'F1' and withdrawn

Bons a Moyen Terme Negociables (BMTN): affirmed at 'A' and withdrawn