The French leading local government and export agency Investor - PowerPoint PPT Presentation

The French leading local government and export agency Investor Presentation – September 2016 www.sfil.fr www.caffil.fr

Agenda 1. A public set up with two public policy missions CAFFIL – The leading public sector covered bond issuer 2. 3. Funding strategy 2

SFIL at the center of a public set up with two public policy missions Two public policy missions Public sphere  Provide funding for French Local authority and hospital investments since 2013  Provide funding for large export contracts as new mission since 2015 Public ownership and close links to the French State ref referen rence shareh reholder  100% publicly owned  Fully regulated financial institution supervised by the ECB and ranked 7 th credit institution in France by assets  Debt issued by SFIL classified Level 1 for LCR purposes based on the legal obligation of the French government to protect the economic basis of SFIL and maintain its financial viability, Article 10.1.(e)(i), LCR delegated Act, October 2014  Role of CAFFIL as subsidiary of SFIL: covered bonds issuance as main refinancing tool 3

Long run commitment by the French State as reference shareholder  Specific responsibilities under French Law, including  Strict supervision: obligation to recapitalize a financial institution if CEO and Chairman of SFIL appointed by o needed: presidential decree Banque de France may ask reference o French State represented on the o shareholders to provide necessary support (Art. supervisory board 511- 42 French Monetary and Financial Code) Scope of business strictly limited to the two o Particular responsibilities in terms of financial o public policy missions support Appointment of Specific CEO, responsibilities representation under French on supervisory Law board Obligations of the reference shareholder are documented via a letter of comfort to the regulator, clearly defining support and involvement The French State is the reference shareholder of SFIL and has the intention to remain reference shareholder in the long run 4

Role of SFIL in a European context Export Credit Activity Local Authority Finance activity *  Similar set ups exist in most European countries Local Authority Finance Activity to finance local government investments and * export contracts Local Authority Finance Activity Local Authority Finance Activity * * Local Authority Finance Activity * Export Credit Activity Local Authority Finance Activity * Export Credit Activity Local Authority Finance Activity * Export + Local Authority Finance Activity Export Credit Activity * * Export + Local Authority Finance Activity * Member of the European Association of Public Banks (EAPB) 5

First public mission: refinance loans to the French local public sector December 28 th 2012 2015 February 2013 2013 - 2014 2013 and 2014: 2015: First lender to European Commission Creation of SFIL at the • • • • Second lender to the confirms need for a public center of a new public set the local public sector set up to provide a stable up French local public sector with over EUR 5 billion access to long dated in new loans EUR 3.3 billion in new SFIL takes full ownership • • funding for the local of DEXMA, now CAFFIL lending in 2013 and EUR 25% market share • public sector 4.2 billion in 2014 Refinancing via issuance of • covered bonds, loan origination via La Banque Postal 6

Second public mission: provide financing for large export credits February 2015 May 2015 Q3 – Q4 2015 June 2016 French State announces European Commission Build-up of the internal Closing of a EUR 550 m workforce and a new public export Approval for the new financing transaction credit scheme based on public mission of SFIL and processes , framework for a total contract value SFIL and CAFFIL agreement with 15 banks CAFFIL received on May of 1.3 billion for two capabilities 5th 2015 including all major cruise ships build by STX players in the export France credit sector “The execution of this transaction demonstrates the competitiveness of the mechanisms in support of our exporters put in place by the State” Michel Sapin, Minister of Finance, 1 st of July 2016 7

Second public mission: provide financing for large export credit SFIL’s set up: a refinancing platform open to all commercial banks  The vast majority of OECD countries rely on a public set up for the refinancing of export loans through two different models:  Public refinancing platform: SFIL (France), SEK (Sweden), FEC (Finland), KFW (Germany), CDP (Italy)  Direct public lender: US EXIM (US), JBIC (Japan), KEXIM (Korea), EDC (Canada) Exposures linked to the export credit activity constitute 100% French government exposures Export credit guarantee covering 95% of the overall loan SFIL takes 95% of the export loan (fully guaranteed part) Export Client – Foreign country Export Bank as agent and originator Export bank will keep an exposure of 5% of the loan (unguaranteed part) of the loan 8

Strong credit ratings SFIL reached high quality ratings on the basis of:  High strategic importance for the French State as a key source of funding for the local public sector and French exports  Status as a State owned development bank, French State as reference shareholder with specific responsibilities in terms of financial support without time limitation  Close supervision by the French State as majority shareholder – all important decisions require approval by the French State  Strong capital ratios and strong support in terms of liquidity from the shareholders Issuer Ratings Moody’s S&P Fitch SFIL – Long Term Aa3 AA AA- SFIL – Short Term P-1 A-1+ F1+ Moody’s S&P Fitch French State Aa2 AA AA Negative outlook by S&P on the ratings of SFIL reflecting the negative outlook on France 9

Simple and straightforward balance sheet, strong capitalization Main balance sheet items of SFIL on a consolidated basis Consolidated main balance sheet items June 30 th , 2016 - (EUR billion) Loans and securities 59.2 Equity 1.4 Refinancing by shareholders 7.7 Commercial paper 0.9 Covered bonds 52.8 Cash assets 2.9 Cash collateral paid 3.0 Cash collateral received 2.2 CET1 ratio: 23.4% (Basel III phased-in)  Simple and straightforward balance sheet, activity limited to the refinancing of public sector assets, strong capitalization  Strong asset quality: average risk weighting under Basel III advanced internal rating model of only 6.5%  Long term refinancing mainly via issuance of covered bonds  Additional liquidity needs provided by shareholders via liquidity lines All figures including CAFFIL 10

Key specialized financial institution BALANCE SHEET ACTIVITY RATIOS 23.4% EUR 5 billion EUR 85.8 billion New loans to the French local CET1 Ratio SFIL consolidated balance sheet public sector in 2015 (LBP and 30 th June 2016 (Basel III phased- assets 30 th June 2016 SFIL) in) 20 th out of 130 banks Over EUR 18 billion Over EUR 50 billion ECB stress test, equity October Covered bonds issued since the Outstanding covered bonds 2014 creation of SFIL in 2013 EUR 5.2 billion 1.0% NPL 401 Employees Basel III RWA (SFIL consolidated) 30 th June 2016 (CAFFIL) 31 st December 2015 30 th June 2016 11

Agenda 1. A public set up with two public policy missions CAFFIL – The leading public sector covered bond issuer 2. 3. Funding strategy 12

Obligations Foncières - protection via strong legal framework • Sole activity is to acquire and • 5% permanent mandatory manage mortgage and/or over-collateralization 1- A Bank with public sector assets 2-Strict balance business • Strict rules on interest rate sheet • Dedicated legal and limited to low risk and maturity matching management regulatory framework 3-Access to liquidity risk activities • No currency risk independently from • Controlled and certified by auditors and “ Contrôleur sponsor bank Spécifique ” • Balance sheet distinct from • Seniority of payments sponsor bank to OF holders 4-Strong 3-Bankruptcy • Bankruptcy remote from investor • No early redemption or remote from the sponsor bank/servicer protection acceleration of payment sponsor • Access to interbank and ECB • Derivative counterparties repo facilities maintained rank pari passu • Operational continuity • OF excluded from bail-in ensured by the replacement process of sponsor bank of the servicer 13

Strong credit ratings CAFFIL obtained highest possible ratings on the basis of:  Strategic importance of public policy missions  Close links to the French State, as reference shareholder of SFIL, with specific responsibilities in terms of financial support without time limitation Legal status and strict supervision under French covered bond framework  Comfortable level of overcollateralization, high quality and prudent management of the cover pool  According to current rating methodologies, public sector covered bond ratings of CAFFIL are capped  one notch above SFIL (and the sovereign) for S&P and at the same level as the sovereign in the case of Fitch Issuer Ratings Moody’s S&P Fitch French State Aa2 AA AA SFIL Aa3 AA AA- Issuer Ratings Moody’s S&P Fitch CAFFIL Aaa AA+ AA Negative outlook by S&P on the ratings of SFIL and CAFFIL 14