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

Investor Presentation – September 2016 The French leading local government and export agency

www.sfil.fr www.caffil.fr

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Agenda

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

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SFIL at the center of a public set up with two public policy missions

Two public policy missions

• 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

• 100% publicly owned
• Fully regulated financial institution supervised by

the ECB and ranked 7th 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

ref referen rence shareh reholder

Public sphere

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Long run commitment by the French State as reference shareholder

Obligations of the reference shareholder are documented via a letter of comfort to the regulator, clearly defining support and involvement

• Specific responsibilities under French Law, including
• bligation to recapitalize a financial institution if

needed:

• Banque de France may ask reference

shareholders to provide necessary support (Art. 511- 42 French Monetary and Financial Code)

• Particular responsibilities in terms of financial

support

• Strict supervision:
• CEO and Chairman of SFIL appointed by

presidential decree

• French State represented on the

supervisory board

• Scope of business strictly limited to the two

public policy missions

The French State is the reference shareholder of SFIL and has the intention to remain reference shareholder in the long run

Specific responsibilities under French Law Appointment of CEO, representation

• n supervisory

board

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• Similar set ups exist in most European countries

to finance local government investments and export contracts

Role of SFIL in a European context

* * * * *

* Member of the European Association of Public Banks (EAPB)

* *

Local Authority Finance activity Local Authority Finance Activity Export Credit Activity Export Credit Activity Local Authority Finance Activity Local Authority Finance Activity Local Authority Finance Activity Local Authority Finance Activity Export + Local Authority Finance Activity Local Authority Finance Activity Export Credit Activity Export Credit Activity Export + Local Authority Finance Activity

* *

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First public mission: refinance loans to the French local public sector

2015

• European Commission

confirms need for a public set up to provide a stable access to long dated funding for the local public sector

• Creation of SFIL at the

center of a new public set up

• SFIL takes full ownership
• f DEXMA, now CAFFIL
• Refinancing via issuance of

covered bonds, loan

• rigination via La Banque

Postal

February 2013 December 28th 2012 2013 - 2014

• 2013 and 2014:

Second lender to the French local public sector

• EUR 3.3 billion in new

lending in 2013 and EUR 4.2 billion in 2014

• 2015: First lender to

the local public sector with over EUR 5 billion in new loans

• 25% market share

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Second public mission: provide financing for large export credits

June 2016

French State announces a new public export credit scheme based on SFIL and CAFFIL capabilities European Commission Approval for the new public mission of SFIL and CAFFIL received on May 5th 2015

May 2015 February 2015 Q3 – Q4 2015

Build-up of the internal workforce and processes, framework agreement with 15 banks including all major players in the export credit sector Closing of a EUR 550 m financing transaction for a total contract value

• f 1.3 billion for two

cruise ships build by STX France

“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, 1st of July 2016

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Second public mission: provide financing for large export credit

Export Bank as agent and originator

• f the loan

Export Client – Foreign country

SFIL takes 95% of the export loan (fully guaranteed part) Export bank will keep an exposure of 5% of the loan (unguaranteed part) Export credit guarantee covering 95% of the overall loan

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

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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

Strong credit ratings

Negative outlook by S&P on the ratings of SFIL reflecting the negative outlook on France

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

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Main balance sheet items of SFIL on a consolidated basis

• 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

Simple and straightforward balance sheet, strong capitalization

All figures including CAFFIL

Loans and securities 59.2 Cash assets 2.9 Cash collateral paid 3.0 Equity 1.4 Refinancing by shareholders 7.7 Commercial paper 0.9 Covered bonds 52.8 Cash collateral received 2.2 Consolidated main balance sheet items June 30th, 2016 - (EUR billion) CET1 ratio: 23.4% (Basel III phased-in)

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23.4%

CET1 Ratio

30th June 2016 (Basel III phased- in)

EUR 85.8 billion

SFIL consolidated balance sheet assets 30th June 2016

Over EUR 50 billion

Outstanding covered bonds

EUR 5.2 billion

Basel III RWA (SFIL consolidated) 30th June 2016

20th out of 130 banks

ECB stress test, equity October 2014

Over EUR 18 billion

Covered bonds issued since the creation of SFIL in 2013

EUR 5 billion

New loans to the French local public sector in 2015 (LBP and SFIL)

BALANCE SHEET ACTIVITY RATIOS

401 Employees

31st December 2015

1.0% NPL

30th June 2016 (CAFFIL)

Key specialized financial institution

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Agenda

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

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Obligations Foncières - protection via strong legal framework

3-Access to liquidity independently from sponsor bank

4-Strong investor protection 1- A Bank with business limited to low risk activities 2-Strict balance sheet management

• Balance sheet distinct from

sponsor bank

• Bankruptcy remote from

sponsor bank/servicer

• Access to interbank and ECB

repo facilities maintained

• Operational continuity

ensured by the replacement

• f the servicer
• Sole activity is to acquire and

manage mortgage and/or public sector assets

• Dedicated legal and

regulatory framework

• Controlled and certified by

auditors and “Contrôleur Spécifique”

• 5% permanent mandatory
• ver-collateralization
• Strict rules on interest rate

risk and maturity matching

• No currency risk

3-Bankruptcy remote from the sponsor

• Seniority of payments

to OF holders

• No early redemption or

acceleration of payment

• Derivative counterparties

rank pari passu

• OF excluded from bail-in

process of sponsor bank

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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
• ne notch above SFIL (and the sovereign) for S&P and at the same level as the sovereign in the

case of Fitch

Strong credit ratings

Negative outlook by S&P on the ratings of SFIL and CAFFIL

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

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Main balance sheet items of CAFFIL

2.5 52.8

Main balance sheet items June 30th, 2016 - (in EUR billion) Over-collateral Equity 1.4 Senior unsecured credit facilities 5.5 Cover pool 61.0 Covered bonds 52.8 Cash collateral 1.3 Solvency ratio (Basel III phased-in) 23.9%

EUR 6.9 billion equity and unsecured financing Total privileged debt of EUR 54.1 billion comprises EUR 52.8 billion covered bonds Cover pool of 61.0 billion Regulatory, OC

• f 12.1%

…and EUR 1.3 billion cash collateral received from derivative counterparties

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A well functioning and cost efficient set up

• Transfer of loans via true sale from La Banque Postale
• SFIL acts as servicer for CAFFIL and for La Banque Postale
• Full control of credit risk by CAFFIL during the origination process and again prior to transfer
• Cost efficient and well integrated partnership: loan origination by La Banque Postale, servicing of the loans by

SFIL, who also acts as servicer of CAFFIL

Refinancing of local public sector loans via issuance of covered bonds

French Local Public Sector

Service provider

Covered bond investors

Refinancing via issuance of covered bonds Origination of French local public sector loans Transfer True Sale

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Refinancing of the export credit activity via CAFFIL

No transfer of the export loan – refinancing loan with unconditional and irrevocable State guarantee

• A refinancing loan from CAFFIL to SFIL - matching the export loan characteristics - serves to refinance the

export loan acquired by SFIL, the export loan will not be part of the cover pool

• New cover pool exposure consists of refinancing loans to SFIL benefiting from an irrevocable and

unconditional 100% guarantee by the French Republic (enhanced guarantee mechanism law n°2012-1510)

• Refinancing loans represent public sector exposures fully CRR compliant (Art. 129)
• One single cover pool for local public sector loans and refinancing loans with an irrevocable and unconditional

100% guarantee by the French Republic * French export credit guarantee scheme is currently managed by Coface and will taken over by BPI France in the course of 2016

Issuance of covered bonds Refinancing loan Irrevocable and unconditional guarantee by the French Republic

Covered bond investors

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Geographic distribution of CAFFIL’s cover pool

Expected Evolution of the cover pool CAFFIL cover pool as of June 30th 2016*

• New assets exclusively French :
• Local government and public hospital loans,
• Export loans benefitting from a French State guarantee
• International legacy portfolio managed in runoff
• Expected evolution of total public sector portfolio over the coming 5 years :
• Share of French assets to increase to above 91%
• Exposures linked to the export credit activity expected to reach 11%
• Expected share of loans to the French local public sector originated since the creation of SFIL around 36%

80.2% 9.8% 4.3% 2.5% 0.9% 2.5% 81.2% 9.4% 3.9% 2.2% 0.9% 2.4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% France Italy UK Switzerland Allemagne Others 31/12/2015 30/06/2016 36% LBP loan activity 11% SFIL export credit * Excluding replacement assets and treasury

80% 85% 91%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 31/12/2015 31/12/2016 31/12/2021

French assets international portfolio

<

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High granularity, low concentration, diversity of borrowers

High granularity, low concentration

• Over 17 000 different counterparties
• Low concentration risk:
• Sum of 20 largest exposures = 13.4% of cover pool
• Largest single borrower exposure represents 1% of cover pool
• 20th largest exposure represents 0.4% of cover pool

Diversity of borrowers - Breakdown by type of counterparty for French exposures as of as of June 30th 2016

Municipalities 53.4% Departments 13.9% Regions 8.5% Public hospitals 11.1% Public sector entities 4.8% States 1% Indirect exposures 7.3%

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Strong asset quality reflected in portfolio risk weightings and comprehensive assessment results

Composition of the cover pool by risk weighting– June 30th 2016 Low risk weightings under advanced internal model

• CAFFIL uses a Basel II advanced internal

rating model approved by the regulator and based on over 10 years of default statistics, financial and fiscal data and 30 explanatory ratios and risk indicators

• The quality of CAFFIL’s cover pool is

reflected by an average risk weighting of

• nly 6.4% versus a standard 20% weighting

under Basel II

• Only 4% of the portfolio carry a weighting

above 20% Comprehensive assessment of asset quality and stress scenarios in October 2014

• Solid CET1 ratio at 13.2% under the

adverse scenario – SFIL ranked 20th out of 130 banks

0.5% 3.5% 20.6% 12.6% 62.8% 0.4% 3.2% 20.2% 15.2% 61.0%

0% 10% 20% 30% 40% 50% 60% 70% >50% ]20%- 50%] ]5%- 20%] ]2%-5%] [0%-2%]

31/12/2015 30/06/2016

Standard weighting 20% Weighting assets

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Agenda

1. A public set up with two public policy missions 2. SFIL – High quality assets and stringent financial policies 3. CAFFIL – The leading public sector covered bond issuer 4. Funding strategy

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Agenda

i. SFIL as issuer in the agency space ii. Covered bond issuance via CAFFIL

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SFIL group funding mix Issuance of covered bonds via CAFFIL main funding tool July 2013 French CP Program

• perational since August

2015 provides a source of diversification for short dated funding August 2015 Liquidity lines provided by shareholders CDC and LBP to SFIL February 2013 Bond issuance by SFIL in 2016 to further diversifiy sources of funding Last Quarter 2016

LCR Level 1* LCR Level 1* LCR Level 1*

* European Commission Delegated Act, October 2014

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Sources of funding for SFIL

2.5 52.8

Increasing flexibility and diversification

Up to EUR 13.75 billion EUR 5 billion Up to EUR 2 billion

New EMTN Program

• Planned program size: EUR 5

billion

• LCR Level 1 classification*
• Focus on benchmark issuance
• Ratings Aa3 (Moody’s), AA

(S&P), AA- (Fitch) French Short Term CP Program

• Program size: EUR 2 billion
• Maximum maturity: 1 year
• Launched in 2015
• Growing activity in 2016
• Average outstanding amount above

EUR 600 m

• Ratings: P1 (Moody’s), A-1+ (S&P),

F1+ (Fitch)

• Labelled STEP under ID 2812
• LCR Level 1 classification*

CDC and LBP long term partnership

• Liquidity lines
• Currently drawn for an amount
• f EUR 7.7 billion
• Maximum amount: EUR 13.75

billion, of which up to EUR 12.5 billion provided by CDC

* European Commission Delegated Act, October 2014

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SFIL issuance programs

Benchmark issuance Private Placements

• Inaugural expected S2

2016

• Regular issuance in EUR

and in USD: One or two benchmarks per year

• Targeted maturities

between 3 to 10 years

• Issuance under EMTN

program

• Issuance potentially in EUR,

USD

• Targeted maturities between

3 to 10 years

Short Term French CP Program

• Program size: EUR 2

billion

• Ratings: P1 (Moody’s), A-

1+ (S&P), F1+ (Fitch)

• Labelled STEP
• Launched in 2015
• Average outstanding

amount above EUR 600 million in 2016

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SFIL Funding Id-Card

Bloomberg ticker SFILFR M-Mkt <GO>

(Short Term French CP Program)

Website

www.sfil.fr

Label STEP under ID 2812 ECB refinancing Potential access to ECB refinancing Issuer Ratings

Aa3/AA/AA- (Moodys/S&P/Fitch)

LCR Level 1

European Commission Delegated Act, October 2014

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Agenda

i. SFIL as issuer in the agency space ii. Covered bond issuance via CAFFIL

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CAFFIL – Funding activity 2013 - 2015

Feb 2013

SFIL / CAFFIL Set up

July 2013 Inaugural transaction Jumbo 7Y Sept 2013 Longest French Covered Bond- Benchmark 15Y

Jan 2014

First French Covered Bond

Jumbo 10Y

April 2014 15Y increased Sept 2014 First sub- Libor French CB Jumbo 5Y

Jan 2015

2015 Longest

Covered Bond

20Y

April 2015 CAFFIL’s tightest benchmark Jumbo 8Y Sept 2015 First 10Y Jumbo since March 2015 Jumbo 10Y Oct 2015 Long 7Y Jumbo in 2015 Jumbo long 7Y 2015 - Expansion year € 6.2 bn raised with 10 years average life 2014 - Confirmation Year € 4bn raised 11.5 years a long average life 2013 - Inaugural Year € 3bn raised 12.4 years a long average life

CAFFIL a key Issuer Over €50bn outstanding with a large investor recognition Over €18bn raised since 2013

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CAFFIL – Funding activity - 2016

• Over EUR 300 m issued, very long average maturities
• Strong demand from the German investor base under

RCB format

Public issuance - first French dual tranche since 2011, first French covered bond of 2016

27% 39% 47% 39% 53% 31% 45% 42% 0% 20% 40% 60% 80% 100% CAFFIL 2025 CAFFIL 2026 CAFFIL 2031 CAFFIL 2022 Germany & Austria France UK Switzerland Asia Nordics Benelux Others 55% 37% 40% 45% 31% 23% 10% 40% 4% 27% 44% 5% 10% 13% 6% 10% 0% 20% 40% 60% 80% 100% CAFFIL 2025 CAFFIL 2026 CAFFIL 2031 CAFFIL 2022 Central Banks Banks Insurance Asset Managers

January: First French dual tranche since 2011 and first French covered bond of 2016

• Mid term maturity (long 6y) : €1bn with 50 investors
• MS+7 bps / OAT+ 25bps
• Duration trade with 15y (Jan 2031) : Benchmark size
• f €500M with over 30 orders collected
• MS+25 bps / OAT +8 bps

April : highly successful 10 year benchmark

• Benchmark size of €1.25billion with over 80 orders
• MS+14 bps / OAT +26 bps

June: successful 9 year benchmark

• Benchmark size: €1bn, more than 50 orders
• MS+4 bps / OAT+14 bps

Private Placements

[<= 5Y] 22% [10Y-15Y] 49% RCB 52% Structured 49% [15Y-20Y] 28% EMTN 48% Vanille 51% 0% 20% 40% 60% 80% 100% Placement by maturity Placement by format Placement by type

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CAFFIL Funding Strategy - Public Issuance

Regular Benchmark issuance Possible Taps Currency diversification Regular on-the-run benchmark transactions:

• with an interest from medium

to long duration

• benchmark size
• A complete reference curve

Possibility to tap outstanding benchmark covered bonds on a selective basis:

• With a minimum size of EUR

150m

• Maximum outstanding volume

per bond limited to EUR 2 billion (tap included) Diversification via foreign currency issuance as long as:

• there is investor interest
• cost of funding after hedging

swap in EUR is consistent with EUR funding levels

• Transaction fits with ALM
• bjectives in terms of duration

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CAFFIL Funding Strategy - Private Placements

 Objectives  answer to specific and tailor-made investor demand  enhance issuance programme execution, providing diversification, granularity and smooth execution for both CAFFIL and Investors  provide a permanent offer of private placements for our investors to catch opportunities  work notably on maturities unusual for public issuance (20 years and over)

EMTN Program RCB Issuance

Currency - vanilla pay-off EUR - CHF - GBP - JPY - USD Lightly structured pay-off EUR Minimum size €10M – No Maximum size RCB assignment flexibility €1M

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CAFFIL Funding Id-Card

Bloomberg ticker CAFFIL Govt <GO> Website

Including Documentation and Factsheet

www.caffil.fr

Bonds legal framework

Obligations foncières (OF) benefiting from the legal privilege defined by French law

http://www.ecbc.eu/framework/show/id/73

ECB Eligibility

All CAFFIL Euro jumbo benchmarks are eligible under best liquidity category achievable (category II)

https://mfi-assets.ecb.int/query_EA.htm

Ratings

Aaa/AA+/AA (Moodys/S&P/Fitch) Since Jan. 1, 2013

https://www.coveredbondlabel.com/

EMTN Programme

Size €75bn Hard Bullet Listing Paris Luxembourg Governing French law Obligation Foncières issued by CAFFIL meet the CRR / CRD IV and UCITS standards RWA 10% (standardized approach)

CRR and UCITS Compliant

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Key Take-Aways

• Two public policy missions:
• financing tool for the French local public sector
• Refinancing platform for export credit loans reinforces strategic role for the French State
• Strong credit ratings reflect strong support from the French State as reference shareholder
• Strong asset quality - French public sector assets to represent 90% of portfolio by 2021
• Status as public development bank reflected by LCR classification as HQLA Level 1 asset

“We regard Société de Financement Local (SFIL) as a government-related entity, and we believe there is an almost certain likelihood that the French government would provide SFIL with extraordinary support if needed.”

S&P Rating Report April 29th 2016

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Contacts

Financial Markets Management Olivier Eudes Head of Market Activities +33(0)1 3013 3908

• livier.eudes@sfil.fr

Investor Relations Ralf Berninger, CFA Head of Investor Relations Tel : + 33(0)1 7328 8807 ralf.berninger@sfil.fr Bouchra Rhajbal Investor Relations Tel : + 33(0)1 7328 8414 bouchra,rhajbal@sfil.fr investorrelations@sfil.fr Treasury and Funding Desk Gonzague Veillas Head of Treasury and Funding Tel : +33(0)1 3013 3909 gonzague.veillas@sfil.fr Guillaume Levesque Treasury and Funding Tel : +33(0)1 3013 3910 guillaume.levesque@sfil.fr Djamel Outahar Treasury and Funding Tel : +33(0)1 3013 3912 djamel.outahar@sfil.fr Anne-Sophie Perfetta Treasury and Funding Tel : +33(0)1 3013 39 11 anne-sophie.perfetta@sfil.fr Prisca Sabarros Treasury and Funding Tel : +33(0)1 3013 39 13 prisca.sabarros@sfil.fr

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Disclaimer

This document does not constitute or form part of any offer or solicitation to purchase or subscribe for securities and should not be considered as a recommendation by SFIL and/or CAFFIL that any recipient of this document should subscribe for or purchase any securities. The distribution of this document may be restricted by law or regulation in certain countries. Accordingly, persons who come into possession of this document should inform themselves of and observe these restrictions. This document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. This document is not for distribution, directly or indirectly, in or into the United States of America or to any "US Person" as defined in the U.S. Securities Act of 1933, as amended (the "Securities Act"). In addition, this document is being distributed to and is directed only at persons in member states of the European Economic Area ("EEA") who are "qualified investors" within the meaning of article 2(1)(e) of the Prospectus Directive (directive 2003/71/EC), as amended, to the extent implemented in the relevant member state ("Qualified Investors"). Any person in the EEA who receives this document will be deemed to have represented and agreed that it is a Qualified Investor. Any such recipient will also be deemed to have represented and agreed that it has not received this document on behalf of persons in the EEA other than Qualified Investors. SFIL and/or CAFFIL will rely upon the truth and accuracy of the foregoing representations and agreements. Some information or opinions contained in this document (i) have been compiled or arrived at by SFIL and CAFFIL from sources believed to be reliable, but SFIL and CAFFIL do not make any representation as to their accuracy or completeness and (ii) are given at the date mentioned in the presentation and are subject to change without notice. This document is not to be relied upon as such or used in substitution for the exercise of any independent judgment and each recipient must make its own investigation as to the opportunity of any investment in SFIL and/or CAFFIL.