MOODY'S CHANGES BACK TO STABLE FROM POSITIVE THE OUTLOOK FOR THE LONG-TERM RATINGS OF CREDIT SUISSE GROUP AND ITS SUBSIDIARIES (SENIOR AT Aa3)
Moody's Investors Service changed back to stable from positive the rating outlook for the Aa3 senior debt ratings of Credit Suisse Group, the Aa3 long-term deposit and senior debt ratings of both Credit Suisse and Credit Suisse First Boston (CSFB), the B financial strength rating of Credit Suisse, and the Aa3 insurance financial strength rating of Winterthur Insurance. The outlook for the C financial strength rating of CSFB remains stable.
According to Moody's, the rating outlook change reflects the negative impact of the ongoing difficulties at CSFB on the overall performance of the consolidated Credit Suisse Group - in spite of a structural positive trend in the group's other business units, underpinned by a more cohesive group organization following the successful execution of management strategies in recent years. The rating agency said that CSFB will remain challenged to reduce its large fixed cost base in an economic and capital markets environment which is expected to remain tough for 2002. Although the proportion of multi-year compensation guaranteed bonuses will drop substantially this year and the next, more difficult revenue generation could place renewed pressure to cut costs even further than the annualized US$1 billion of expenses being currently targeted.
Moody's continues to believe that successful implementation of the cost-cutting program should help improve CSFB's profit margins and compensation burden to more competitive levels, but demonstrable progress in these metrics and reduced earnings volatility could take several years to emerge. The rating agency also highlighted the risk that CSFB could cut too deeply, thus impairing its future revenue-generating capacity. CSFB has made significant progress since 1998 in improving its overall risk management, but that risk control and compliance issues remain -- though they are being addressed. As such, Moody's continues to see CSFB's risk profile as moderately high.
With respect to the group's other business units, Moody's said that, despite the lower performance of the equity markets, those divisions which focus of wealth gathering and management -- mainly Credit Suisse Private Banking and Credit Suisse Asset Management, but also, to a lesser extent, Credit Suisse Banking -- succeeded in maintaining strong momentum in terms of net new asset growth -- even though results were negatively impacted by the decline in brokerage commissions and the drop in net asset values. The Credit Suisse legal entity -- which is involved in both universal banking in Switzerland and private banking globally -- now benefits from good operating efficiency and a low risk profile. Moody's continues to view positively the group's strategy targeting the growing segment of onshore savings in Europe, the successful realization of which could generate sustainable profits over the longer term.
With respect to Winterthur Insurance, Moody's said that the insurance group provides a meaningful level of income to the Credit Suisse group and regards Winterthur as a whole as core to Credit Suisse. Recent years have also seen even closer integration of Winterthur's insurance operations with the wider group, with in January 2002 Winterthur's businesses becoming part of the Credit Suisse Financial Services division. The rating agency also noted that, following the sale of Winterthur International in July 2001, and recent acquisitions in particular in the UK, Winterthur Insurance should exhibit a lower-risk, more retail-oriented risk profile than in the past. Furthermore, Winterthur Life & Pensions continues to maintain and develop its market presence in several key European markets.
The Credit Suisse group has its headquarters in Zurich, Switzerland. At end-June 2001, the group posted total assets of CHF1,118 billion (about €755 billion and US$657 billion).
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