RCI Banque (RCI), Renault’s captive finance business, was awarded a one-notch upgrade from Moody’s earlier in 2023 with senior unsecured ratings raised to Baa1 from Baa2. The move coincided with a one-notch upgrade of its parent, with Moody’s citing that the improvement in Renault’s credit worthiness benefitted the fundamentals of RCI, since it is an integral part of Renault’s business model.
On a standalone basis, RCI benefits from strong fundamentals among auto-captive peers, with one of the lowest cost-to-income ratios of 33% and the highest levels of profitability. The Bank’s average return on equity is around 17% over the past five years. The bank also benefits from high and stable earnings combined with limited credit losses, with 2.1% of non-performing loans reported in FY22.
RCI benefits from an increasing deposit base, largely through RCI’s savings accounts, which represent around 45% of the group’s borrowing needs. The bank still has a relatively high dependence on wholesale funding compared to larger and diversified banks, albeit with good access to debt capital markets.
RCI credit could outperform in the event Renault is upgraded, noting that the market has an improving issuer credit outlook for Renault.