Baseline Credit Assessment affirmed at baa2
Frankfurt am Main, December 02, 2019 -- Moody's Investors Service ("Moody's") today affirmed
the Baa2 senior unsecured debt ratings of Credit Suisse Group AG and the
A1 long-term senior unsecured debt and deposit ratings of its principal
bank subsidiary, Credit Suisse AG. The outlook on these ratings
has been changed to positive from stable.
The rating agency further affirmed Credit Suisse AG's baa2 Baseline Credit
Assessment (BCA), its baa2 Adjusted BCA and its A1(cr)/P-1(cr)
Counterparty Risk Assessment as well as all its other long- and
short-term ratings. The senior unsecured debt, issuer
as well as deposit ratings of all of Credit Suisse's subsidiaries -
where applicable - have also been affirmed.
For a full list of all affected ratings, please refer to the end
of this press release.
RATINGS RATIONALE
Affirmation
The affirmation of Credit Suisse's (CS) ratings reflects its solid
capital position, the bank's pro-active approach to risk
management as well as its superior liquidity position, all of which
help mitigate risks inherent in its capital markets activities,
including wholesale funding sensitivities. The ratings remain further
supported by the stable earnings and lower risk profile of the bank's
large global wealth management franchise and well-positioned domestic
Swiss banking franchise producing a higher share of recurring revenues
post restructuring.
The affirmation also takes account of the bank's integrated business
model that will continue to rely on a higher share of capital markets
businesses versus most other global investment banks: Moody's estimates
that CS's capital market divisions -- Investment Banking
and Capital Markets, Global Markets and Asia Pacific Markets --
combined will consume approximately 40% of group risk-weighted
assets and leverage exposure. The group's comparatively higher
dependence on transaction-driven capital market revenues as well
as its relatively high exposure to underwriting of leveraged lending and
as high-yield debt transactions, however, has the potential
to exert meaningful strain on CS's earnings in a highly adverse
market environment.
"In its first year post its restructuring, Credit Suisse has demonstrated
earnings resilience in a more challenging macroeconomic environment negatively
affecting its primary capital markets activities. However,
the bank's structurally reduced cost base has sustainably lowered
its break-even point, making it more resilient to external
market pressures," said Michael Rohr, Senior Vice President
at Moody's. "Credit Suisse's profitability is expected to recover
further and be sustained at a level commensurate with higher-rated
peers over time, supporting the positive outlook. Following
the completion of its restructuring, Moody's now expects sustained
capital generation through earnings and maintenance of a strong liquidity
position to provide protection to bondholders" added Rohr.
Aside from these fundamental considerations, Moody's assessment
of the volume of loss absorbing debt under its Advanced Loss Given Failure
(LGF) analysis and of the probability of government support have not changed.
Moody's also does not have any particular governance concern for
CS, and does not apply any corporate behaviour adjustment to the
bank. Nonetheless, corporate governance remains a key credit
consideration and will continue to be monitored on an ongoing basis.
Positive outlook
The positive outlook on CS's senior long-term ratings reflects
Moody's expectation that CS will be able to defend its improved and more
stable profitability on the back of meaningfully lower non-recurring
charges, supported by sustained lower funding costs and its structurally
lower cost base in its capital markets operations. Moody's
further takes account of the progress the firm has made in executing on
its restructuring plan, which included a meaningful de-risking
of its balance sheet, restoring underlying profitability --
in particular in its capital markets-oriented business units --
as well as the resolution of almost all major outstanding litigation matters.
The positive outlook also reflects the improvement in the bank's
liquidity and funding profile, as displayed through a peer-leading
liquidity coverage ratio (LCR) and an above-average maturity profile
of its more confidence-sensitive market funding, both of
which the rating agency expects to be maintained. CS has issued
most of its loss-absorbing debt earlier than many peers and the
related debt issuances have significantly extended CS's debt maturity
profile and lowered its refinancing risk. If maintained,
CS's improved ability to manage funding and liquidity needs across
the group will increase its resilience to periods of high volatility or
funding market dislocation.
WHAT COULD MOVE THE RATINGS UP/DOWN
Upward pressure on CS's ratings could arise if the group (1) were to achieve
and defend a sustainable improvement in its profitability metrics around
the communicated target levels; (2) maintained its strict risk controls
and improved governance principles, in particular in its capital
markets-oriented business segments; and (3) managed to keep
at least constant the share of revenue and profits generated from its
more stable wealth management and universal banking businesses.
Any upgrade remains further contingent on the group containing its wholesale
funding dependence expressed through Moody's market funds ratio
at or below the year-end 2018 level.
Although considered unlikely given the positive outlook, the ratings
could be downgraded if CS (1) failed to continuously deliver on the changes
implemented to its business model, in particular if it failed to
stabilize revenues, thereby not being able to sustain positive operating
leverage; (2) were to suffer from a significant control or risk management
failure; or (3) materially increased its risk appetite against a
more challenging market environment, in particular if it grew higher-risk
capital markets businesses. The ratings may also be downgraded
in the event of a significant and faster-than-anticipated
decline in the Swiss or global economies, or an unexpected and meaningful
deterioration in the group's capital or its liquidity and funding profile.
The ratings could further be downgraded should there be a significant
and larger-than-anticipated decrease in the bank's existing
stock of bail-in-able liabilities. Although regarded
highly unlikely at present, this may lead to fewer notches of rating
uplift as a result of Moody's Advanced LGF analysis.
LIST OF AFFECTED RATINGS
Issuer: Credit Suisse AG
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A1
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Long-term Bank Deposits,
affirmed A1, outlook changed to Positive from Stable
....Short-term Bank Deposits,
affirmed P-1
....Long-term Deposit Note/CD Program,
affirmed (P)A1
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Long-term Issuer Rating,
affirmed A1, outlook changed to Positive from Stable
....Baseline Credit Assessment, affirmed
baa2
....Adjusted Baseline Credit Assessment,
affirmed baa2
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, outlook changed to Positive from Stable
....Senior Unsecured Shelf, affirmed
(P)A1
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Subordinate Regular Bond/Debenture,
affirmed Baa3
....Subordinate Shelf, affirmed (P)Baa3
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
....Commercial Paper, affirmed P-1
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: Credit Suisse Group AG
..Affirmations:
....Senior Unsecured Regular Bond/Debenture,
affirmed Baa2, outlook changed to Positive from Stable
....Senior Unsecured Shelf, affirmed
(P)Baa2
....Senior Unsecured Medium-Term Note
Program, affirmed (P)Baa2
....Subordinate Shelf, affirmed (P)Baa3
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
....Preferred Stock Non-cumulative,
affirmed Ba2(hyb)
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: Credit Suisse AG (Guernsey) Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A1
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, outlook changed to Positive from Stable
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: Credit Suisse AG (London) Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A1
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Long-term Bank Deposits,
affirmed A1, outlook changed to Positive from Stable
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, outlook changed to Positive from Stable
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Subordinate Regular Bond/Debenture,
affirmed Baa3
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: Credit Suisse AG (Nassau) Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A1
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, outlook changed to Positive from Stable
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: Credit Suisse AG (New York) Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A1
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Long-term Bank Deposits,
affirmed A1, outlook changed to Positive from Stable
....Short-term Bank Deposits,
affirmed P-1
....Long-term Deposit Note/CD Program
Takedown, affirmed A1, outlook changed to Positive from Stable
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, outlook changed to Positive from Stable
....Senior Unsecured Shelf, affirmed
(P)A1
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Subordinate Regular Bond/Debenture,
affirmed Baa3
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
....Commercial Paper, affirmed P-1
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: Credit Suisse AG (Sydney) Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A1
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Short-term Deposit Note/CD Program,
affirmed P-1
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, outlook changed to Positive from Stable
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Commercial Paper, affirmed P-1
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: Credit Suisse AG (Tokyo) Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A1
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1, outlook changed to Positive from Stable
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: Credit Suisse (USA) Inc.
..Affirmations:
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed A1, outlook changed to Positive from Stable
....Backed Senior Unsecured Shelf, affirmed
(P)A1
....Backed Senior Unsecured Medium-Term
Note Program, affirmed (P)A1
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: DLJ Cayman Islands LDC (debt assumed by Credit Suisse International)
..Affirmation:
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed A1, outlook changed to Positive from Stable
..No Outlook assigned
Issuer: Credit Suisse International
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A1
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Backed long-term Bank Deposits,
affirmed A1, outlook changed to Positive from Stable
....Backed short-term Bank Deposits,
affirmed P-1
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Long-term Issuer Rating,
affirmed A1, outlook changed to Positive from Stable
....Backed Senior Unsecured Shelf, affirmed
(P)A1
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: Credit Suisse Group Finance (US) Inc.
..Affirmation:
....Backed Subordinate Regular Bond/Debenture,
affirmed Baa3
..No Outlook assigned
Issuer: Credit Suisse Group Funding (Guernsey) Ltd
..Affirmations:
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed Baa2, outlook changed to Positive from Stable
..Outlook Action:
....Outlook changed to Positive from Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in November 2019. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 Rohr
Senior Vice President
Financial Institutions Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
