London, 27 December 2016 -- Moody's today affirmed the ratings of Credit Suisse AG (A1 senior
debt, A1 deposits, baa2 Baseline Credit Assessment) following
Credit Suisse's announcement of a settlement in principle with the
U.S. Department of Justice (DOJ) regarding civil claims
in connection with the bank's issuance and underwriting of residential
mortgage-backed securities (RMBS) conducted through 2007.
Under the agreement, Credit Suisse has agreed to pay a civil monetary
penalty of USD2.48 billion and to provide USD2.8 billion
in consumer relief to be delivered over the course of five years post
settlement. The outlook on Credit Suisse's debt and deposit
ratings is stable.
RATINGS RATIONALE
The affirmation reflects Moody's view that the settlement is positive
for Credit Suisse's creditors since it substantially reduces litigation
tail risk and the expected impact on capital ratios is manageable,
notwithstanding the large dollar amounts involved. At 30 September
2016, after giving effect to the reserve increase related to the
settlement, Moody's estimates that Credit Suisse's CET1
on a fully-loaded basis will be approximately 11.2%.
The cash portion of the settlement is USD2.48 billion, comprised
of civil monetary penalties. Credit Suisse intends to add USD2
billion (CHF 2.05 billion) to its existing litigation reserves
in the fourth quarter -- bringing the total litigation reserve to
CHF 4.2 billion before the settlement. Assuming no other
charges in the fourth quarter, this would leave Credit Suisse with
approximately CHF 1.7 billion in litigation reserves, after
the cash portion of the DOJ settlement, to cover remaining litigation
exposures. Credit Suisse still faces RMBS litigation pending with
a number of states' attorney generals and the Federal Deposit Insurance
Corporation (FDIC). While our rating includes an expectation of
penalties for these claims, an outsized penalty could weigh on the
rating.
The settlement also includes USD2.8 billion in consumer relief
expected to be delivered primarily in the form of loan modifications over
a period of five years from settlement and are not expected to have a
material impact on 2016 results.
This settlement reduces uncertainty, and will improve management's
ability to focus on execution of its updated strategy which will benefit
bondholders if successfully achieved. Moody's considers that Credit
Suisse's performance through the current restructuring exercise is consistent
with the current baa2 BCA. This reflects a balance of near-term
profitability and execution challenges with our expectation that,
should the restructuring be successful, profitability will be restored
such that it may put upward pressure on the rating. The Group's
current weak profitability reflects the business is currently in the trough
of its restructuring effort and will continue to face pressure from the
disposal of non-core assets held in its Strategic Resolution Unit
(SRU). We expect management to prioritize the minority IPO of its
Swiss subsidiary business in the second half of 2017 while also continuing
to build capital through disposals in the SRU.
FACTORS THAT COULD LEAD TO AN UPGRADE
Upward pressure on the bank's ratings could arise if the bank were to
successfully achieve a substantial and sustainable improvement in profitability.
The ratings could also see upward pressure should the bank significantly
reduce the risk profile and its reliance on earnings from its capital
markets businesses.
FACTORS THAT COULD LEAD TO A DOWNGRADE
The rating could face downward pressure if the bank fails to successfully
execute the planned changes to its business model, or if it were
to suffer from a significant control or risk management failure,
or materially increase its risk appetite.
The ratings could also face further downward pressure in the event of
a significant decline in the Swiss economy, or a deterioration in
the bank's capital or liquidity profile.
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
LIST OF AFFECTED RATINGS
Issuer: Credit Suisse Group AG
..Rating Actions:
....Senior Unsecured Medium-Term Note
Program, affirmed (P)Baa2
....Senior Unsecured Shelf, affirmed
(P)Baa2
....Subordinate Seniority Shelf, affirmed
(P)Baa3
..Outlook Actions:
....Outlook, Remains Stable
Issuer: Credit Suisse AG
..Rating Actions:
....Baseline Credit Assessment, affirmed
baa2
....Adjusted Baseline Credit Assessment,
affirmed baa2
....Counterparty Risk Assessment, affirmed
A1(cr)/P-1(cr)
....Issuer Rating, affirmed A1,
STA
....Local Currency Deposit Rating, affirmed
A1, STA/P-1
....Foreign Currency Deposit Rating,
affirmed A1, STA/P-1
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, STA
....Senior Unsecured Deposit Program,
affirmed (P)A1
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Senior Unsecured Shelf, affirmed
(P)A1
....Subordinate Regular Bond/Debenture,
affirmed Baa3
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
....Subordinate Shelf, affirmed (P)Baa3
....Senior Unsecured Commercial Paper,
affirmed P-1
....Short-Term Medium-Term Note
Program, affirmed (P)P-1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: Credit Suisse AG (Guernsey) Branch
..Rating Actions:
....Counterparty Risk Assessment, affirmed
A1(cr)/P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, STA
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Junior Subordinated Regular Bond/Debenture,
affirmed Baa3(hyb)
....Non-cumulative Preferred Stock,
affirmed Ba2(hyb)
....Short-Term Medium-Term Note
Program, affirmed (P)P-1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: Credit Suisse AG (London) Branch
..Rating Actions:
....Counterparty Risk Assessment, affirmed
A1(cr)/P-1(cr)
....Foreign Currency Deposit Rating,
affirmed A1, STA
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, STA
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Subordinate Regular Bond/Debenture,
affirmed Baa3
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
....Short-Term Regular Bond/Debenture,
Affirmed P-1
....Short-Term Medium-Term Note
Program, affirmed (P)P-1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: Credit Suisse AG (Nassau) Branch
..Rating Actions:
....Counterparty Risk Assessment, affirmed
A1(cr)/P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, STA
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
....Short-Term Medium-Term Note
Program, affirmed (P)P-1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: Credit Suisse AG (New York) Branch
..Rating Actions:
....Counterparty Risk Assessment, affirmed
A1(cr)/P-1(cr)
....Local Currency Deposit Rating, affirmed
A1, STA/P-1
....Senior Unsecured Deposit Note/Takedown,
affirmed A1, STA
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, STA
....Senior Unsecured Conv./Exch.
Bond/Debenture, affirmed A1, STA
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Senior Unsecured Shelf, affirmed
(P)A1
....Subordinate Regular Bond/Debenture,
affirmed Baa3
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
....Senior Unsecured Commercial Paper,
Affirmed P-1
....Short-Term Medium-Term Note
Program, affirmed (P)P-1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: Credit Suisse AG (Sydney) Branch
..Rating Actions:
....Counterparty Risk Assessment, affirmed
A1(cr)/P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, STA
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Senior Unsecured Commercial Paper,
affirmed P-1
....Senior Unsecured Deposit Program,
affirmed P-1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: Credit Suisse AG (Tokyo) Branch
..Rating Actions:
....Counterparty Risk Assessment, affirmed
A1(cr)/P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, STA
..Outlook Actions:
....Outlook, Remains Stable
Issuer: Credit Suisse Group Funding (Guernsey) Ltd
..Rating Actions:
....BACKED Senior Unsecured Regular Bond/Debenture,
affirmed Baa2, STA
....BACKED Senior Unsecured Medium-Term
Note Program, affirmed (P)Baa2
..Outlook Actions:
....Outlook, Remains Stable
Issuer: Credit Suisse Group Finance (US) Inc.
..Rating Actions:
....Subordinate Regular Bond/Debenture,
affirmed Baa3
Issuer: Credit Suisse (USA) Inc.
..Rating Actions:
....BACKED Senior Unsecured Regular Bond/Debenture,
affirmed A1, STA
....BACKED Senior Unsecured Shelf, affirmed
(P)A1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: DLJ Cayman Islands LDC
..Rating Actions:
....BACKED Senior Unsecured Regular Bond/Debenture,
affirmed A1, STA
Issuer: Credit Suisse International
..Rating Actions:
....Counterparty Risk Assessment, affirmed
A1(cr)/P-1(cr)
....Issuer Rating, affirmed A1,
STA
....BACKED Deposit Rating, affirmed
A1, STA/P-1
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, STA
....BACKED Senior Unsecured Shelf, affirmed
(P)A1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: Credit Suisse Group Finance (Guernsey) Ltd.
..Rating Actions:
....BACKED Senior Unsecured Regular Bond/Debenture,
affirmed Baa2, STA
....BACKED Junior Subordinated Regular Bond/Debenture,
affirmed Ba1(hyb)
..Outlook Actions:
....Outlook, Remains Stable
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Michael Eberhardt, CFA
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Robert Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
