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Rating Action:

Moody's assigns Baa2(hyb) rating to Julius Baer Group Ltd.'s low-trigger Additional Tier 1 securities

29 May 2019

Frankfurt am Main, May 29, 2019 -- Moody's Investors Service (Moody's) has today assigned a Baa2(hyb) rating to the CHF-denominated low-trigger Additional Tier 1 (AT1) securities ("Perpetual Tier 1 Subordinated Bonds") to be issued by Julius Baer Group Ltd. (JBG).

Moody's said that JBG's as well as Bank Julius Baer & Co. Ltd.'s (BJB) existing ratings and stable outlooks are unaffected by today's rating action.

RATINGS RATIONALE

The Baa2(hyb) rating assigned to JBG's low-trigger AT1 securities, or "contractually non-viability preferred securities", takes into account the instrument's perpetual deeply subordinated claim in liquidation, as well as the security's non-cumulative coupon deferral features and is positioned three notches below BJB's Adjusted Baseline Credit Assessment (BCA) of a2. The rating of this instrument class does not benefit from government support uplift, in line with Moody's assumptions of a low probability of government support to be forthcoming to instruments with recognition as regulatory capital.

According to Moody's framework for rating non-viability securities under its bank rating methodology, the agency typically positions the rating of low-trigger AT1 securities three notches below the bank's Adjusted BCA. One notch reflects the high loss-given-failure that these securities are likely to face in a resolution scenario, due to their deep subordination, small volume and limited protection from residual equity. Moody's rating for non-viability securities also incorporates two additional notches to reflect the higher risk associated with the non-cumulative coupon skip mechanism, which could take effect prior to the issuer reaching the point of non-viability.

In insolvency, JBG's AT1 securities rank junior to subordinated instruments, pari passu with other deeply subordinated securities and senior only to the issuer's ordinary shares and other capital instruments that qualify as Common Equity Tier 1 (CET1). Coupons may be cancelled in full or in part on a non-cumulative basis at the issuer's discretion or mandatorily in case distributable reserves were not sufficient or if ordered by the regulator. The principal of the securities is permanently written-down, partially if JBG's regulatory CET1 capital ratio falls below 5.125% or fully in case a non-viability event has occurred. JBG's CET1 ratio was 13.1% at the end of April 2019.

WHAT COULD CHANGE THE RATING UP / DOWN

The rating of this instrument could be upgraded in case of an upgrade of BJB's (Adjusted) BCA, from which it is derived. BJB's BCA could be upgraded if the bank and the group (1) meaningfully and sustainably improve their capital ratios, in particular their leverage ratios; (2) further improve their already sound profitability, supported by sustained net new money inflows supporting Assets under Management, without increasing the risk of its business profile.

The rating could also be upgraded following a massive increase in the volume of pari passu ranking AT1 instruments, beyond Moody's current expectations and assumptions. This may lead to a reduction in the expected loss-given-failure with positive rating implications.

The rating of this instrument could be downgraded if BJB's (Adjusted) BCA is downgraded. A downgrade of BJB's BCA could follow (1) an unexpected materialisation of operational risks, specifically if caused by litigation charges in connection with typical wealth management lawsuits or IT security issues that are severe enough to threaten the bank's or the group's reputation; (2) substantial capital reductions or unprecedented capital outflow; (3) any substantial and persistent outflow of client funds, especially if caused by underperformance of investment products, causing sustained and significant profitability pressures; or (4) acquisitions that are unduly aggressive from a commercial, financial or operational risk viewpoint.

Moody's may also consider a wider notching between BJB's Adjusted BCA and this instrument, if its capitalisation were to decrease materially.

LIST OF ASSIGNED RATING:

Issuer: Julius Baer Group Ltd.

Assignment:

... Local-currency preferred stock non-cumulative rating (low-trigger AT1) of Baa2(hyb)

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was Banks published in August 2018. 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 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.

Swen Metzler, CFA
VP - Senior Credit Officer
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

Alexander Hendricks, CFA
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

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

No Related Data.
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