S&P Affirms Credit Mutuel, Upgrades CIC; Off Watch.

PARIS--(BUSINESS WIRE)--Standard & Poor's CreditWire 8/5/98-- Standard & Poor's today affirmed its single-A'-plus counterparty credit rating of Caisse Centrale de Credit Mutuel (CCCM) and that of related entities (see list below). The outlook is negative. In addition, the short-term counterparty credit rating of Banque Federative du Credit Mutuel (BFCM) and related entity has been downgraded to 'A-1' from 'A-1'-plus. These decisions are based on the fact that the acquisition of 67% of CIC's capital by Credit Mutuel has negative implications for the latter's financial profile and represents a considerable management challenge for the mutualist bank. The ratings of CCCM, BFCM, and their respective related entities have been removed from CreditWatch with negative implications, where they were placed on April 15, 1998 after the announcement by the French ministry of finance that the Credit Mutuel group had been chosen to acquire the CIC group.

In a related action, Standard & Poor's upgraded thelong-term credit ratings of Compagnie Financiere de CIC et de l'Union Europeenne (CFCIC-UE) and related entities (see list below) to single-'A' from single-'A'-minus and their short-term credit ratings to 'A-1' from 'A-2.' The ratings have been removed from CreditWatch with positive implications, where they were placed on April 15, 1998. The outlook on CFCIC-UE's long-term rating is stable. The upgrade of CFCIC-UE's long-term rating reflects the strategic nature of the CIC group's acquisition for Credit Mutuel, and the expectation that Credit Mutuel will help its subsidiary to continue to improve its profitability.

Credit Mutuel Group: The ratings of CCCM and related entities derive from an analysis of the Credit Mutuel group on a consolidated basis. The Credit Mutuel group's 'A+/A-1' ratings are based on its solid market shares in France and capital ratios, which are still satisfactory, although in rapid decline following its acquisition of CIC. The acquisition of CIC has a negative impact on Credit Mutuel's profitability ratios however, especially on its cost-to-income ratio and its asset-quality indicators.

In April 1998, Credit Mutuel was chosen by the French government to acquire 67% of the CIC group, the ninth-largest banking group in France. Credit Mutuel Centre Est Europe (CMCEE, the Alsace-Lorraine based bank and owner of BFCM) is the strongest regional bank within the Credit Mutuel group. Indeed, CMCEE (via BFCM) was able to finance the FFr13.4 billion CIC acquisition entirely from own funds. Up until the acquisition, CMCEE's superior financial strength within the Credit Mutuel group meant that it had a higher short-term rating than other group members. However, the consolidation of CIC has a negative impact on CMCEE's capital levels, profitability ratios, and asset-quality indicators. Therefore, there is no longer any justification for rating BFCM higher than other members of the mutualist group.

There is little overlap between the customer bases of Credit Mutuel and CIC, as Credit Mutuel is focused on the mass market, with a particularly strong presence in eastern and western France, while CIC is more orientated toward upscale individuals, professionals, and small and midsize companies throughout the country. Including CIC, Credit Mutuel counts among the three largest retail banking groups in France, with total assets in excess of French Franc (FFr)1,200 billion (US$200 billion at FFr6.0 to US$1), 4,880 branches, 44,700 employees, and an estimated domestic market share of 11.5% of deposits and 11% of credits (based on Dec. 31, 1997 data).

The consolidation of CIC, which historically has had weaker efficiency, asset quality and capital ratios than Credit Mutuel, means an erosion in the latter's consolidated financial performance, with a decline in its operating profitability ratios and an increase in its cost-to-income ratio to more than 70%. Although the consolidation of CIC also means an abrupt decline in Credit Mutuel's Bank for International Settlements (BIS) Tier 1 ratio to 8.0%, this level is still satisfactory in light of the enlarged group's risk profile. Standard & Poor's also expects this ratio to progressively increase from its present level.

CIC Group: The upgrade of CFCIC-UE's long-term rating reflects the strategic nature of the CIC group's acquisition for Credit Mutuel, and the expectation that Credit Mutuel will help its subsidiary to continue to improve its profitability, mostly through stronger coordination between regional banks and better risk control. Essentially, CIC's strategy is to continue to concentrate its commercial development on its three core markets: small and midsize companies; members of the liberal professions; and relatively high-net-worth individuals. It is also endeavoring to increase its competitiveness through the application of common technology and back-office resources throughout the group. CIC will benefit from its new shareholder's expertise in both areas.

CIC has a relatively high asset-risk profile, reflecting its concentration on small businesses. Domestic asset quality has improved in recent years. In 1997, the group suffered from exposure to Asian commitments, which should continue to require significant additional provisions in the years ahead. These provisions are not expected to impact CIC's improving profitability, however.

Credit Mutuel Outlook : Negative The negative outlook on the Credit Mutuel group's long-term single-'A'-plus rating reflects Standard & Poor's expectation that the rating could come under pressure if Credit Mutuel fails to oversee a pick-up in CIC's profits, particularly, if there is no improvement in the latter's cost-to-income ratio. Credit Mutuel's rating could also come under pressure if it fails to meet the challenge of managing and controlling a CIC group whose federal structure gives considerable autonomy to its constituent regional banks. Credit Mutuel's management will also be challenged to combine two banking groups with distinct corporate cultures and management styles. Finally, the outlook takes into account the group's continuing sensitivity to the low level of interest rates.

CIC Group Outlook: Stable. The stable outlook on CFCIC-UE reflects Standard & Poor's expectation that CIC will continue to improve its profitability in the coming years. The biggest improvement in CIC's profitability will come from efforts to grow its business, cost-saving schemes, and tighter credit-risk controls. CIC should be aided by Credit Mutuel's expertise in all these areas. Credit Mutuel's intention to increase its new subsidiary's Tier 1 ratio to 6% (compared with 5.23% at Dec. 31, 1997) means that CIC's capitalization is also expected to improve in the coming years. Credit Mutuel intends to maintain the decentralized nature of both Credit Mutuel and CIC and two distinct branch networks, meaning that cost savings and operational links between the two groups will remain limited, at least initially, Standard & Poor's said.---CreditWire.

RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH, OUTLOOK REVISED TO NEGATIVE

TO FROM Caisse Centrale du Credit Mutuel Caisse federale du Credit Mutuel du Centre Caisse federale du Credit Mutuel de Savoie-Mont Blanc Caisse federale du Credit Mutuel Antilles-Guyane Caisse federale du Credit Mutuel d'Anjou Caisse federale du Credit Mutuel Dauphine-Vivarais Caisse federale du Credit Mutuel Massif Central Caisse federale du Credit Mutuel d'Ile-de-France Caisse federale du Credit Mutuel de Loire Atlantique et du Centre-Ouest Caisse federale du Credit Mutuel Maine-Anjou Basse-Normandie Caisse federale du Credit Mutuel de Normandie Caisse federale du Credit Mutuel Mediterraneen Caisse federale du Credit Mutuel Midi Atlantique Caisse federale du Credit Mutuel Ocean Caisse federale du Credit Mutuel du Nord de la France Caisse Interfederale de Credit Mutuel Compagnie Financiere du Credit Mutuel de Bretagne Banque du Credit Mutuel pour l'Entreprise Banque Cooperative et Mutuelle Nord

Counterparty credit rtg A+/negative A+/Watch Neg Senior Unsecd A+ A+/Watch Neg Caisse Centrale du Credit Mutuel

Sub debt A A/Watch Neg

RATING DOWNGRADED AND REMOVED FROM CREDITWATCH

TO FROM Banque Federative du Credit Mutuel

Counterparty credit rtg A-1 A-1+/Watch Neg CD A-1 A-1+/Watch Neg Banque de l'Economie Credit Mutuel

(guaranteed by the Banque Federative du Credit Mutuel) Counterparty rtg A-1 A-1+/Watch Neg CD A-1 A-1+/Watch Neg

RATINGS UPGRADED AND REMOVED FROM CREDITWATCH

TO FROM Compagnie Financiere de CIC et de l'Union Europeenne(CFCIC-UE)

Counterparty rtg A/Stable/A-1 A-/Watch Pos/A-2 CD A/A-1 A-/A-2/Watch Pos CP A-1 A-2/Watch Pos CIC Finance (DE) Inc.

Counterparty credit rtg A-1 A-2/Watch Pos CP (Gtd CFCIC-UE) A-1 A-2/Watch Pos CIC Funding

Counterparty Credit rtg A-1 A-2/Watch Pos CP (Gtd by CFCIC-UE) A-1 A-2/Watch Pos

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