Credit Opinion: FGA Capital S.p.A.

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1 Credit Opinion: FGA Capital S.p.A. Global Credit Research - 12 Jan 2015 Torino, Italy Ratings Category Outlook Issuer Rating FGA CAPITAL IRELAND P.L.C. Outlook Bkd Senior Unsecured -Dom Curr Fidis Finance (Suisse) SA Outlook Bkd Senior Unsecured -Dom Curr Moody's Rating Stable Baa3 Stable Baa3 Stable Baa3 Contacts Analyst Phone Carlo Gori/London Maria Jose Mori/Madrid Johannes Wassenberg/London Key Indicators FGA Capital S.p.A. (Consolidated Financials)[1] [2]6-14 [2]12-13 [2]12-12 [2]12-11 [2]12-10 Avg. Total managed assets (EUR thousand) Total managed assets (USD thousand) 16,336, ,562, ,741, ,002, ,231,856.0[3] ,366, ,822, ,753, ,072, ,117,285.8[3]-0.8 Pretax Preprovision profits / Average Managed Assets [4]2.1 (%) Net Income / Average Managed Assets ROE (%) (%) 0.8 [4] [4]10.1 Tangible Common Equity (Finance) / Tangible Managed [4]9.0 Assets (%) Effective Leverage [4]9.0 Problem Loans / Gross Loans (Finance) (%) [4]2.5 Problem Loans / (Shareholders' Equity [4]17.6 Loan Loss Reserve) (Finance) (%) Source: Moody's [1] All figures and ratios are adjusted using Moody's standard adjustments [2] IFRS [3] Compound Annual Growth Rate based on IFRS reporting periods [4] IFRS reporting periods have been used for average calculation Opinion SUMMARY RATING RATIONALE

2 FGA Capital Spa's (FGAC) long-term issuer rating of Baa3, stable, reflects: (i) earnings concentration on net interest income from its car-financing activities, partly mitigated by good geographical diversification; (ii) betterthan-peers asset quality, backed by solid risk management systems; (iii) pressure on business model and profitability coming from still restricted and costly market funding, offset by sound solvency levels; (iv) funding dependence on the banking shareholder Credit Agricole SA (CASA, rated A-2/P-1/Negative), as well as its commercial dependence on FCA N.V. (FCA, rated B1, stable); and (v) a moderate probability of support from CASA in case of need, confirmed by the extension of the joint venture agreement with FCA till December FGAC is a monoline auto-captive credit institution with significant commercial dependence on the business success of its parent company, FCA. As such its financial strength is inherently linked to that of the Italian carmaker. In Italy FGAC does not have a banking license, which prevents it from taking retail deposits and is established as a non-bank financial institution (regulated under Art. 107 T.U.B). As such, it is regulated and supervised by Bank of Italy under a regime that is different from that for credit institutions with banking licence. Rating Drivers - Business concentration on car financing, partly offset by good geographic diversification - Funding entirely reliant on CASA and wholesale funds, primarily in the form of securitizations and banking lines - Good asset quality, satisfactory capital ratios and sound profitability provide some buffer in a more severe scenario - Improving but still challenging operating environment in Europe and Italy dampens business outlook Rating Outlook Moody's says that the stable outlook on FGAC's issuer rating reflects the entity's good credit fundamentals and improved expectations for the European car market. The rating outlook is in line with that of CASA and FCA. What Could Change the Rating - Up Upward pressure could be exerted on the rating as a result of material strengthening of FGAC's financial fundamentals and significant diversification in its business revenues reducing its commercial ties to FCA, resulting in: (1) higher risk-adjusted profits aided by an improvement in efficiency levels in line with European peers; (2) more robust capitalisation; (3) a stronger ultimate support commitment from CASA; and (4) sustainable recovery of FCA. What Could Change the Rating - Down FGAC's rating could face negative pressure as a result of any weakening of funding and ultimate support from CASA, e.g., through the termination of the joint-venture agreement. Furthermore, the materialisation of a more severe stress scenario, caused by a renewed recession, higher cost of funding or contraction in car sales - resulting in a material weakening of FGAC's financial fundamentals, and/or a significant deterioration affecting FCA and its rating - could have negative rating implications for FGAC. DETAILED RATING CONSIDERATIONS BUSINESS CONCENTRATION ON CAR FINANCING, PARTLY OFFSET BY GOOD GEOGRAPHICAL DIVERSIFICATION FGAC business model is based on supporting the vehicle sales of its shareholder, FCA's car manufacturer FCA Italy Spa (unrated), via three main activities: dealer financing, retail financing and long-term rental. Therefore, FGAC's franchise and financial fundamentals are inherently linked to FCA's performance and more broadly to the trend of the European auto manufacturing industry. After having declined by 1.9% in 2013 (ACEA data) the western European passenger car market grew by about 6.2% in the six months to June However we note that car demand is weaker in FCA's home market Italy (+4%), which is currently well below its last peak in fiscal year 2007 and represents approximately 50% of FCA's passenger car registration in Europe. The intense price competition among mass market manufacturers combined with FCA's plan to delay product launches could impair FCA's market position in Europe against peers. In our opinion these elements, together with the still challenging operating environment, may pressure FGAC's financial resilience and lead to some deterioration in asset quality and profitability.

3 This is partly mitigated by FGAC's good geographical diversification, as the company operates directly or through various subsidiaries in 14 European countries, including Italy. This diversification enhances FGAC's franchise, reducing concentration risk in any specific region, and provides for some resilience of its profitability. The most important market for the company remains Italy which accounted for 40% of the average outstanding credit volume at end-2013 (it was 45% at June 2011). On the 30th of July 2013 FCA and CASA extended their Joint Venture (JV) agreement on FGAC till December 2021 from the original date of December FUNDING ENTIRELY RELIANT ON CASA AND WHOLESALE FUNDS, PRIMARILY IN THE FORM OF SECURITIZATIONS AND BANKING LINES Not having a banking licence, but being lightly regulated by the Bank of Italy as a bank (in terms of capital ratios, liquidity, etc.), FGAC is entirely dependent on whole-sale funding, which can be subject to sudden changes in investor confidence and may ultimately result in restricted market access and increased funding costs. However, compared to other captive companies, FGAC benefits in a much stronger way from parental funding, which accounted for 27% of total liabilities (including equity) in June 2014 (see Note 1).Other important funding sources are securitisations (26%) and the market (21%). We note that the extension of the JV agreement led to the signing of a new funding agreement between FGAC, CASA and Credit Agricole Consumer Finance (unrated), which is the subsidiary through which CASA owns FGAC's share. According to the new funding agreement, which has come into force on 1 January 2015, FGAC will continue to benefit from the financial support of its banking shareholder. In our view, CASA's support is a key rating driver. FGAC was able to tap the wholesale markets several times in 2012, 2013 and 2014, denoting a good access to alternative funding sources. We expect this to continue, given the current favorable environment in wholesale markets. (Note 1) Unless noted otherwise, data in this report is sourced from the company, company reports, Moody's Banking Financial Metrics and the Bank of Italy. GOOD ASSET QUALITY, SATISFACTORY CAPITAL RATIOS AND MODEST PROFITABILITY PROVIDE SOME BUFFER IN A MORE SEVERE SCENARIO FGAC's Core Tier 1 ratio of 11.8% in June 2014 (December 201: 11%) is adequate and in line with its risk profile. As of end-2013, problem loans (see Note 2) as percentage of shareholder equity and loan loss reserve stood at a manageable 14.2% compared to 16.8% at the end of While this indicates a satisfactory solvency profile, which we expect to remain so over the coming years, it also denotes sound asset quality, with problem loans accounting for 2.1% of gross lending at end-2013, with a coverage level of 98.4% (versus 2.5% and 93.4% respectively at end-2012). Our opinion also takes into account the intention of the shareholder bank - as laid out in the shareholders' agreement - to maintain an adequate level of Tier 1 capital. Although this agreement does not represent an obligation for CASA, it should provide FGAC with sufficient equity resources in the future and reaffirms its strategic importance to its shareholders. However we caution that the current level of loss absorption capacity is more limited in a more severe scenario. Pre-provision profitability has been traditionally good at FGAC (at 2.1% of average assets in June 2014), but lower than peers due to higher operating expenses. This is partly mitigated by the predominantly variable cost base of the company, which allows it to rapidly adjust to the new operating environment. With average outstanding credit volumes broadly unchanged at EUR 14.7 billion, net profit grew by 7% to EUR 91 million in June This was driven by a reduction of loan loss and other provisions by17% y-o-y and we believe this trend might further strengthen should the recovery solidify in Europe and Italy. (Note 2) Problem loans include: non-performing loans (sofferenze), 30% of watchlist (incagli - including only an estimate of those over 90 days overdue), restructured (ristrutturati) and past due leases (scaduti). IMPROVING BUT STILL CHALLENGING OPERATING ENVIRONMENT IN EUROPE AND ITALY DAMPENS BUSINESS OUTLOOK We expect GDP to grow between 0.5% and 1.5% for the Euro Area and between -0.5% and 0.5% for Italy in However we anticipate the recovery to be bumpy and protracted, as many countries and Italy in particular are struggling to reduce high unemployment levels. This outlook will continue to put pressure on financial institutions' profitability, due to both subdued economic activity and the likelihood that interest rates will remain low for an extended period of time.

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