London, 14 November 2012 -- Moody's Investors Service has today announced that the review for downgrade will be maintained on Banque PSA Finance ("BPF")'s Baa3 and Prime-3 senior unsecured long-term and short-term debt and deposit ratings, pending finalisation of the state support plan for the bank and European Commission (EC) approval, as well as the conclusion of the review of BPF's D+ Bank Financial Strength Rating (BFSR) related to Moody's ongoing rating reviews on European car financiers.

At the same time, the rating agency has taken the following actions:

- BPF's D+ BFSR was remapped to ba1 from baa3 to reflect the weakening of BPF's risk profile as a result of the downgrade of its parent Peugeot S.A. ("PSA"; see press release "Moody's downgrades Peugeot to Ba3; negative outlook" dated 10 October 2012). The BFSR remains on review for downgrade;

- BPF's provisional subordinated and Tier 3 debt programmes were downgraded to (P)Ba2 from (P)Ba1, and the junior subordinated debt programmes to (P)Ba3, from (P)Ba2 as a result of the lowering of BPF's standalone credit assessment to D+/ba1 from which these ratings are notched. In line with the BFSR, these ratings remain on review for downgrade; and,

- BPF's long-term and short-term senior unsecured debt and deposit ratings were held at Baa3 and Prime-3 respectively notwithstanding the reduction in the standalone credit assessment, pending the completion of the ongoing review of those ratings, and following the announcement that the French government (Aaa, negative) has proposed a support package for BPF which may offset the downward pressures on the bank's standalone risk profile.

The ongoing ratings review will primarily focus on the following two drivers:

- The assessment of the implications for BPF's BFSR of the broader review of European captive auto finance institutions announced on 19 October 2012, and the extent to which support from the French government could mitigate any further reduction in BPF's standalone strength resulting from this review; and,

- Finalisation of the French government's support plan for BPF and assessment of the impact of any conditions or restrictions the EC may impose.

Moody's expects to conclude the review before year-end.

RATINGS RATIONALE

BPF'S STANDALONE CREDIT ASSESSMENT LOWERED TO REFLECT DOWNGRADE OF PARENT'S CREDIT RATING

Moody's has today lowered BPF's standalone credit assessment, remapping its BFSR to D+/ba1 from D+/baa3. The standalone credit assessment remains on review for further downgrade.

The lowering of the bank's standalone credit assessment follows the downgrade of the credit rating of BPF's parent, Peugeot SA (PSA), and reflects Moody's view that given the intricate strategic, commercial and financial ties to its parent, BPF's creditworthiness is inherently linked to that of PSA. Accordingly, a reduction in the credit standing of the parent, as reflected in the downgrading of PSA's senior unsecured rating to Ba3, implies a lowering of BPF's standalone credit profile.

These credit linkages with PSA include:

- BPF's dependence on PSA for its own business and franchise value;

- the potential for adverse developments at PSA to impair BPF's funding capacity;

- the ability of PSA to require BPF to pay exceptional dividends (Moody's notes that a EUR360 million exceptional dividend was paid in 2012), subject to regulatory constraints;

- BPF's credit exposures to PSA's car dealer networks; and,

- the risk associated with a possible decline in the value of the vehicles, representing the collateral against BPF's loan book, that could materialize in case of default of PSA.

Today's lowering of the standalone credit assessment reflects these factors. Continued stress at the parent could result in further rating actions on BPF. While Moody's recognizes that BPF's financial performance has so far shown little correlation with that of the car manufacturer, the rating agency believes that this would be unlikely to hold true in the event of the parent's financial distress. Nonetheless, the current standalone credit assessment of D+/ba1 reflects the strengths of the subsidiary and a credit profile healthier than that of its parent, considering the bank's good capitalization and profitability track record, and its matched funding policy along with its liquidity buffer.

ANNOUNCED GOVERNMENT SUPPORT PLAN IS SUPPORTIVE FOR BPF's SENIOR RATINGSBPF's senior unsecured debt and deposit ratings remain Baa3, on review for downgrade, notwithstanding the lowering of the bank's standalone credit assessment, reflecting the announcement of a support package by the French government.

PSA announced on 24 October 2012 a restructuring programme which included a support package for BPF comprising the following key aspects: (i) a EUR7 billion refinancing guarantee provided by the French government for the period 2013-2015; and (ii) the renegotiation of existing credit lines provided by partner banks totalling EUR11.5 billion, and including EUR1 billion of additional funding, assured for the same period.

In Moody's view, the pledged support demonstrates that there is some willingness and commitment on the part of the French government to support BPF as a means of stabilising the franchise of PSA, given its economic relevance as a major car manufacturer and employer in France. The proposals are subject to approvals by both the French parliament and the EC, which are expected by the end of 2012.

This support plan could result in senior creditors being somewhat insulated from the downward pressure on BPF's ratings resulting from stress at the parent level and weaker industry trends. For this reason, Moody's has introduced one notch of systemic support into BPF's long-term ratings at this time, allowing the senior ratings to be maintained, pending the completion of the review.

CONTINUING REVIEW OF SENIOR UNSECURED DEBT AND DEPOSIT RATINGS WILL ASSESS IMPACT OF BROADER TRENDS AFFECTING EUROPEAN CAPTIVE CAR FINANCIERS FOR BPF'S STANDALONE CREDIT ASSESSMENT, AND FINALISATION OF SUPPORT PACKAGE

The review of BPF's senior unsecured debt and deposit ratings will first assess the implications for the bank's BFSR of the review of broader industry trends affecting four rated European captive car finance companies, including BPF (see press release "Moody's reviews ratings of four European captive auto finance institutions" of 19 October 2012). These industry trends comprise:

- The general adverse impact of the deterioration in macroeconomic conditions in Europe, in particular on the auto manufacturing industry;

- Concentrated exposures to car dealers, which are highly correlated with the manufacturers;

- High reliance on market funding, which can be subject to sudden changes in investor confidence; and,

- Some reliance on bank credit lines, the availability and terms of which could be compromised by funding pressure on the banking industry and the prospect of regulatory changes.

Moody's assessment of the strength and implications of these broader trends will determine their impact on BPF's standalone credit assessment. Should that broader industry review result in BPF's BFSR being downgraded, Moody's will assess the potential for support from the French government to mitigate the reduction in BPF's standalone strength.

Finally, the review will monitor the finalisation of the French government's support plan for BPF, and assess the impact of any conditions or restrictions the EC may impose for the support that might be made available to BPF.

SUBORDINATED DEBT

Moody's downgraded the bank's provisional subordinated and Tier 3 debt programmes to (P)Ba2 from (P)Ba1, and the junior subordinated debt programmes to (P)Ba3, from (P)Ba2. These downgrades result from the reduction in BPF's standalone credit assessment to D+/ba1 from which these ratings are notched.

OTHER RATINGS

Moody's has also maintained its review on the Baa3 backed senior unsecured rating of Peugeot Finance International NV, and on the Prime-3 backed commercial paper rating of SOFIRA SNC. Both these entities are subsidiaries of BPF.

WHAT COULD CHANGE THE RATING UP / DOWN

Moody's believes there is little likelihood of any upward rating pressure on BPF. Moody's would likely affirm BPF's senior ratings in the event of (i) the French government implementing its plan as currently pledged and without any material conditions being imposed upon BPF by the EC, and (ii) the review of the bank's standalone profile against the broader trends affecting European captive car financiers leading to no reduction in BPF's BFSR.

If, however the EC were to reject the support plan or impose conditions adversely affecting BPF's credit profile, then Moody's may downgrade the bank's senior ratings. The review of the bank's standalone profile against the background of the weaker risk profile of its parent PSA or the broader trends affecting European captive car financiers may also lead to a lowering of the BPF's standalone risk assessment, other things being equal.

The principal methodology used in these ratings was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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Andrea Usai Vice President - Senior Analyst Financial Institutions Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Carola Schuler MD - Banking Financial Institutions Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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