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Announcement:

Moody's outlook for Swiss banks is negative

 The document has been translated in other languages

10 Dec 2009

London, 10 December 2009 -- The fundamental credit outlook for the Swiss banking system is negative, reflecting the challenges faced by the largest international banks, pressure on banking secrecy rules and the difficult environment for private and domestic banks, says Moody's Investors Service in its new Banking System Outlook on Switzerland.

Moody's negative outlook for the Swiss banking system expresses the rating agency's view on the likely future direction of fundamental credit conditions in the industry over the next 12 to 18 months. It does not represent a projection of rating upgrades versus downgrades.

The outlook primarily reflects (i) the weakening of the domestic macroeconomic environment and (ii) the increasing international pressure on banking secrecy. Nevertheless, Moody's emphasises that domestic players continue to display consistent earnings due to their solid franchises and low levels of risk, although competition and cost efficiency remain challenges.

"Swiss banks' have been affected to varying degrees by the global financial crisis, depending on their international exposures. Large universal banks such as UBS and Credit Suisse have been affected most, reporting significant trading losses and writedowns due to their exposure to the global capital markets and to illiquid structured assets and, in the case of UBS, subsequently suffering from client money outflows. UBS, which suffered significantly greater losses than Credit Suisse, had to raise capital several times and ultimately also benefited from significant government support." says David Fanger, Moody's lead analyst for the two banks.

Switzerland-based wealth and asset managers saw their 2008 profits indirectly affected by the sharp decline in market values, affecting managed assets. In addition to the challenge of adapting their cost bases to declining commission revenues, Moody's cautions that they will need to cope with the increasing pressure from foreign governments on banking confidentiality rules.

Since several private banking centres are adapting their rules simultaneously, Moody's expects money outflows linked to these changes to remain limited. However, doubt surrounds future growth in the offshore segment and private banks will face higher compliance costs. In this context, domestic and cross-border consolidation seems a sensible option at a time when some players are seeking to exit the market and others are looking for economies of scale.

Purely domestically focused banks, such as regional and cantonal banks, face a very different environment and have only been affected to a limited extent by the crisis. Recent profits have been somewhat below the record levels of past years, but Moody's notes that they remain relatively healthy in a long-term perspective and compared with those of European peers.

Switzerland, as a small and export-intensive economy, has seen the global macroeconomic slowdown adversely affect its corporates, SMEs and households and Moody's expects banks' asset quality indicators to deteriorate. However, the rating agency notes that the country has not experienced a real estate bubble and that its unemployment rate, while it is likely to rise, will remain at around only 4% -- about half the average European rate. "Moody's rated Swiss cantonal and regional banks generally have good capital levels, which should help them to withstand the downturn," says Javier Rodriguez, Moody's lead analyst for the Swiss banking system and author of the report.

The principal methodologies used in rating the Swiss banking system are the "Bank Financial Strength Ratings: Global Methodology" and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating the Swiss banking system can also be found in the Rating Methodologies sub-directory on Moody's website.

The "Banking System Outlook: Switzerland" is available on www.moodys.com.

* * * *

NOTE TO JOURNALISTS ONLY: For more information please contact New York Press Information +1-212-553-0376; EMEA Press Information in London +44-20-7772-5456; Juan Pablo Soriano in Madrid +34-91-310-1454; Alex Cataldo in Milan +39-02-914-81-100; Eric de Bodard in Paris +33-1-5330-1020; Detlef Scholz in Frankfurt +49-69-707-30-700; Mardig Haladjian in Limassol +357-25-586-586; Alex Sazhin in Moscow +7-495-228-60-60; Petr Vins in Prague +4202 2422 2929; Tokyo Press Information +813-5408-4110; Hilary Parkes in Toronto +1-416-214-1635; Hong Kong Press Information +852-2916-1150; Hector Lim in Sydney +612 9270 8102; Luiz Tess in São Paulo +5511-3043-7300; Alberto Jones Tamayo in Mexico City +5255-1253-5700; Daniel Rúas in Buenos Aires +54 11-4816-2332 ext. 105; Leon Claassen in Johannesburg +27-11-217-5470; Jehad el-Nakla in Dubai +971 4 401 9536; or visit our web site at www.moodys.com

Frankfurt
Carola Schuler
Managing Director
Financial Institutions Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Javier Rodriguez
Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's outlook for Swiss banks is negative
No Related Data.
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