OREANDA-NEWS. Fitch Ratings has affirmed Credit Mutuel-CIC Home Loan SFH's (CM-CIC HL SFH) EUR21.9bn Obligations de Financement de l'Habitat (OFH) at 'AAA' with a Stable Outlook.

KEY RATING DRIVERS
The 'AAA' rating is based on Banque Federative du Credit Mutel's (BFCM) Long-term Issuer Default Rating (IDR) of 'A+', which acts as reference IDR for this programme, an unchanged IDR uplift of '2', an unchanged Discontinuity Cap (D-Cap) of 3 (moderate high discontinuity risk) and on the programme's 74.9% asset percentage (AP) used for the purpose of the asset cover test (ACT). The Stable Outlook on the OFH reflects that on BFCM's IDR and for French residential asset performance.

Fitch's 'AAA' breakeven AP has increased to 94.0% from 86.5%. This takes into account the negative carry factor of the programme's ACT when determining the breakeven AP and a lower credit risk on the cover pool as the performance data provided allowed us to better differentiate between low and high OLTV loans compared with the previous review.

The 94.0% 'AAA' breakeven AP is equivalent to a breakeven overcollateralisation (OC) of 6.4%. It considers a two-notch recovery uplift above a 'AA' tested rating on a probability of default basis defined as BFCM's IDR adjusted by the IDR uplift. Timely payment is assumed at a 'AA' rating level irrespective of the actual level of AP protection available.

The 'AAA' breakeven OC is driven by the credit loss component of 11.2%. The cash-flow valuation component of -1.2% reduces the 'AAA' breakeven OC and reflects the fact that the programme is hedged against interest rate and currency risks. Finally, the asset disposal loss component of 0.5% benefits from the negative carry factor of the ACT, which compensates the cost of sales triggered by asset and liability mismatches.

The unchanged D-Cap of '3' is due to the weak link assessment of the Liquidity Gap and Systemic Risk component.

The unchanged IDR uplift of '2' reflects the exemption of the covered bonds from bail-in, Fitch's view that France is a covered bonds-intensive jurisdiction, the fact that Fitch considers that resolution by other means than liquidation is likely for Credit Mutuel-CIC and the protection provided by senior unsecured debt in excess of 5% of total adjusted assets.

RATING SENSITIVITIES
CM-CIC HL SFH's rating is vulnerable to a downgrade if any of the following occurs: (i) BFCM's IDR is downgraded to 'BBB' or below; (ii) the sum of the IDR uplift and the D-Cap falls to one or below; (iii) the AP Fitch relies upon increases above the 'AAA' breakeven level of 94.0%.