Credit Suisse's ratings affirmed
Frankfurt am Main, April 05, 2018 -- Moody's Investors Service has placed on review for upgrade UBS Group AG's
long-term ratings as well as the long-term senior unsecured
debt and deposit ratings of its subsidiaries, including its principal
bank subsidiary, UBS AG. The rating agency further placed
under review for upgrade all of UBS entities' long-term ratings,
including UBS Group AG's Ba1(hyb) preferred stock ratings as well as UBS
AG's Aa3 long-term deposit ratings and its A1 long-term
issuer and senior unsecured debt ratings. UBS AG's baa1 Baseline
Credit Assessment (BCA), its baa1 Adjusted BCA and its Aa3(cr) Counterparty
Risk (CR) Assessment have also been placed under review for upgrade.
Moody's today also 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, with a stable outlook. The rating agency further affirmed
Credit Suisse AG's baa2 BCA, its baa2 Adjusted BCA and its
A1(cr)/P-1(cr) Counterparty Risk (CR) Assessment as well as all
of its other long- and short-term ratings. The senior
unsecured debt, issuer as well as deposit ratings of all of Credit
Suisse's subsidiaries have also been affirmed.
For a full list of all affected ratings, please refer to the end
of this press release.
RATINGS RATIONALE
---UBS
The review for upgrade on UBS's long-term ratings takes account
of UBS's reduction in capital intensive capital market activities
and the curtailment of a large number of inherently more volatile fixed
income product lines. In Moody's view, this has resulted
in a less complex investment banking operation, more aligned with
its wealth and asset management businesses and more focused on less capital-intensive
and flow-based capital markets segments such as Equities,
Foreign Exchange (FX) and Advisory. As a result of the 'right
sizing and refocusing' of the investment bank and meaningful restructuring
that has taken place, Moody's believes that the volatility
in earnings from UBS's inherently more volatile revenue streams
is now more likely to be mitigated by its solid 'shock absorbers'
provided by the group's more stable earnings generated within its
wealth and asset management as well as Swiss universal banking businesses
going forward.
In addition, the rating agency has observed further maturation and
greater embedding of the group's revised risk governance framework
over this period which, if sustained, would continue to support
an improving risk profile and earnings stability, and thereby support
the group's credit profile. Importantly, the firm's
business planning and capital allocation as well as distribution processes
are constrained by the outputs of its board-approved capital management
and stress testing framework, which incorporates guidance to maintain
a common equity Tier 1 (CET1) capital ratio of around 13%.
Any loosening of the underlying framework, however, in particular
stepping back on the combined stress testing approach and its influence
on limit setting and risk appetite or inconsistent application of UBS's
risk governance throughout the various group segments would be regarded
as credit negative.
During the review, Moody's will assess the degree to which
UBS will be able to further improve its profitability levels or to sustain
these even under less favorable market conditions. The rating agency
will examine the stability of the group's expected earnings profile
and volatility as well as analyze the resilience of the group's
profitability and capital position to adverse market conditions.
In doing so, Moody's will focus on the stability and earnings
potential of the group's key earnings drivers, i.e.
its global wealth management and asset management businesses as well as
its Swiss domestic universal banking businesses and investigate whether
these would sustainably provide sufficient loss absorption capacity to
mitigate the risks and greater earnings volatility inherent in the group's
remaining capital markets businesses.
Any ratings upgrade would also be contingent on UBS maintaining firm control
on risks taken within the group, in particular within its Investment
Bank, as well as the group's success in controlling costs
and reducing the drag on earnings from its Non-core and Legacy
Portfolio (NCL), over and above the levels achieved in 2017.
UBS's current ratings take account of the group's still sizeable
capital markets activities, the inherent volatility, risk
opacity and confidence sensitivity within and of the capital markets-related
client base, and moderate reliance on wholesale funding.
All of these factors continue to constrain UBS's credit profile.
Despite the evidenced reduction in capital markets-related risks,
Moody's believes that potential additional litigation charges remain
a key threat to the bank's trajectory of an improving profitability and,
in a highly adverse scenario, its solid capitalization. Most
notably, UBS remains exposed to litigation risk in connection with
its activities in the US residential mortgage-backed securities
(RMBS) market prior to the financial crisis, which could lead to
sizeable incremental litigation charges. However, UBS has
already established significant provisions for its US RMBS litigation
exposures, which reduces the risk that any additional provisions
required could have a significant negative impact on earnings or capital.
UBS's ratings remain further supported by the bank's superior global
wealth management and well-positioned Swiss universal banking franchises,
its strong liquidity profile, and its robust risk-based capital
ratios and solid leverage ratios. Moody's anticipates UBS's
risk-based capital ratios to remain among the strongest in comparison
to its global peers; and Moody's expects UBS to continue growing
its capital stock and maintain its solid capital ratios, despite
expected regulatory pressures over the next three to five years.
---CREDIT SUISSE
The affirmation of Credit Suisse's (CS) ratings with an unchanged
stable outlook reflects Moody's consideration that, despite CS's
sound performance throughout its current restructuring program,
the bank will have to carry a material burden from de-risking and
business re-alignment in 2018, constraining its profitability
prospects. While execution challenges are easing as CS approaches
the final stages of its three-year restructuring plan outlined
in 2015, its profitability will face continued pressure from the
disposal of remaining non-core assets held in its Strategic Resolution
Unit (SRU) and restructuring charges. At the same time, the
rating agency believes that CS has made strong progress in reducing tail
risks to earnings and capital from outstanding legacy litigation issues,
in particular following the US RMBS settlement in 2017.
From 2019 onward, Moody's anticipates CS's profitability
to increasingly benefit from the reduced costs of off-loading non-core
assets, lower funding costs as more expensive legacy capital instruments
are redeemed and the near absence of meaningful restructuring costs.
In particular, CS expects the SRU to produce a USD500 million pre-tax
loss in 2019, down significantly from CHF1.85 billion in
2017 and CHF1.4 billion forecasted for 2018. Nevertheless,
and owing to the uncertain outlook on revenues, Moody's believes
it will be difficult maintaining a sizeable positive absolute gap between
revenue and cost developments going forward, despite the visible
success of CS's large-scale restructuring and capital reallocation
program.
Moreover, upward rating pressure would only arise from a combination
of a significant and sustainable improvement in profitability coupled
with a further meaningful reduction of risks arising from CS's significant
exposures to capital market activities. Albeit partially de-risked
over the past three years, the group's integrated business
model will continue to rely on a higher share of capital markets businesses
versus 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 continue to make up approximately 30% of the group's
pre-tax profits and 40% of group risk-weighted assets
over the next three years. The group's comparatively higher
dependence on transaction-driven capital market revenues and particularly
its relatively high risk appetite and exposure to underwriting of leveraged
lending as well as high-yield debt transactions will continue to
constrain its credit profile.
At the same time, CS's ratings remain 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 in the future, the
bank's pro-active approach to risk management as well as its sound
liquidity position. The rating agency also expects the bank to
maintain its meanwhile strengthened capital position, despite ongoing
regulatory pressures and higher payout plans that are likely to constrain
a faster CET1 capital ratio build-up.
The stable outlook on Credit Suisse's ratings reflects its strong capital
position, good risk management, and sound liquidity position.
The outlook further takes account of progress made thus far in implementing
the group's evolving strategy.
WHAT COULD CHANGE THE RATING UP/DOWN
UBS AG's BCA will be upgraded if Moody's were to conclude
that (1) UBS will be able to improve, or sustain and defend,
its earnings profile as well as profitability levels even under less benign
market conditions; (2) the risks from UBS's capital markets
franchise remain well controlled and managed and the group's capacity
to absorb larger unexpected losses has achieved a level such that those
losses no longer risk diluting UBS's strong capital position;
and (3) UBS will be able to further build on its solid capital position
while still balancing bondholders' and shareholders' interests.
UBS AG's long-term senior unsecured debt ratings could also
be upgraded if the bank were to continue to issue and thereby maintain
the current proportion of bail-in-able liabilities in relation
to tangible banking assets, affording greater protection to the
bank's senior creditors. This may lead to one additional
notch of rating uplift as a result of Moody's Advanced Loss Given
Failure (LGF) analysis. There is no upward pressure on Credit Suisse
AG's debt and deposit ratings because they already benefit from
three notches of rating uplift under Moody's Advanced LGF analysis,
the maximum achievable.
Upward pressure on CS's ratings could arise if the group were to successfully
achieve a substantial and sustainable improvement in profitability,
coupled with a meaningful reduction of its risk profile and a significantly
reduced reliance on earnings from its capital markets businesses.
Any upgrade remains further contingent on the group reducing its wholesale
funding dependence to a level commensurate with higher rated peers.
The two banks' ratings could face downward pressure if the banks
were to suffer from any control or risk management failure, if there
were a significant decline in the Swiss economy, if the banks were
to materially increase their risk appetite - evidence of which
could be a significant expansion of the investment banking franchise -
or if there were a deterioration in the banks' capital or liquidity
profiles. The ratings could also face downward pressure if the
banks failed to successfully execute the planned changes to their business
models and/or fail to achieve the targeted return levels.
The two banks' ratings could further be downgraded should there
be a significant and larger-than-anticipated decrease in
the banks' existing bail-in-able debt cushion leading
to a higher loss severity for their different debt classes. Although
regarded 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
The following ratings and rating assessments were placed on review for
upgrade:
Issuer: UBS Group AG
....Preferred Stock Non-cumulative,
currently Ba1(hyb)
..Outlook Action:
....Outlook changed to Rating under Review
from Stable
Issuer: UBS AG
....Long-term Counterparty Risk Assessment,
currently Aa3(cr)
....Long-term Bank Deposits,
currently Aa3, outlook changed to Rating under Review from Stable
....Long-term Deposit Note/CD Program,
currently (P)Aa3
....Subordinate Deposit Note/CD Program,
currently (P)Baa2
....Long-term Issuer Rating,
currently A1, outlook changed to Rating under Review from Stable
....Senior Unsecured Regular Bond/Debenture,
currently A1, outlook changed to Rating under Review from Stable
....Senior Unsecured Medium-Term Note
Program, currently (P)A1
....Senior Unsecured Shelf, currently
(P)A1
....Subordinate Medium-Term Note Program,
currently (P)Baa2
....Adjusted Baseline Credit Assessment,
currently baa1
....Baseline Credit Assessment, currently
baa1
..Outlook Action:
....Outlook changed to Rating under Review
from Stable
Issuer: Swiss Bank Corporation
....Backed Subordinate Regular Bond/Debenture,
currently Baa2
..No Outlook assigned
Issuer: Swiss Bank Corporation, New York Branch
....Backed Subordinate Regular Bond/Debenture,
currently Baa2
..No Outlook assigned
Issuer: UBS AG, Australian Branch
....Long-term Counterparty Risk Assessment,
currently Aa3(cr)
....Senior Unsecured Regular Bond/Debenture,
currently A1, outlook changed to Rating under Review from Stable
....Senior Unsecured Medium-Term Note
Program, currently (P)A1
....Subordinate Medium-Term Note Program,
currently (P)Baa2
..Outlook Action:
....Outlook changed to Rating under Review
from Stable
Issuer: UBS AG, Jersey Branch
....Long-term Counterparty Risk Assessment,
currently Aa3(cr)
....Senior Unsecured Regular Bond/Debenture,
currently A1, outlook changed to Rating under Review from Stable
....Senior Unsecured Medium-Term Note
Program, currently (P)A1
....Senior Unsecured Shelf, currently
(P)A1
....Subordinate Regular Bond/Debenture,
currently Baa2
....Subordinate Medium-Term Note Program,
currently (P)Baa2
..Outlook Action:
....Outlook changed to Rating under Review
from Stable
Issuer: UBS AG, London Branch
....Long-term Counterparty Risk Assessment,
currently Aa3(cr)
....Senior Unsecured Regular Bond/Debenture,
currently A1, outlook changed to Rating under Review from Stable
....Senior Unsecured Medium-Term Note
Program, currently (P)A1
....Subordinate Medium-Term Note Program,
currently (P)Baa2
..Outlook Action:
....Outlook changed to Rating under Review
from Stable
Issuer: UBS AG, New York Branch
....Long-term Counterparty Risk Assessment,
currently Aa3(cr)
....Long-term Deposit Note/CD Program,
currently (P)Aa3
....Subordinate Deposit Note/CD Program,
currently (P)Baa2
....Senior Unsecured Medium-Term Note
Program, currently (P)A1
....Subordinate Medium-Term Note Program,
currently (P)Baa2
..No Outlook assigned
Issuer: UBS AG, Stamford Branch
....Long-term Counterparty Risk Assessment,
currently Aa3(cr)
....Long-term Deposit Note/CD Program,
currently (P)Aa3
.... Subordinate Deposit Note/CD Program,
currently (P)Baa2
....Senior Unsecured Regular Bond/Debenture,
currently A1, outlook changed to Rating under Review from Stable
....Senior Unsecured Medium-Term Note
Program, currently (P)A1
....Subordinate Medium-Term Note Program,
currently (P)Baa2
..Outlook Action:
....Outlook changed to Rating under Review
from Stable
Issuer: UBS Americas, Inc.
....Backed Issuer Rating, currently
A1, outlook changed to Rating under Review from Stable
....Backed Senior Unsecured Regular Bond/Debenture,
currently A1, outlook changed to Rating under Review from Stable
....Backed Senior Unsecured Shelf, currently
(P)A1
..Outlook Action:
....Outlook changed to Rating under Review
from Stable
Issuer: UBS Finance (Curacao) N.V.
....Backed Senior Unsecured Regular Bond/Debenture,
currently A1, outlook changed to Rating under Review from Stable
..Outlook Action:
....Outlook changed to Rating under Review
from Stable
Issuer: UBS Limited
....Long-term Issuer Ratings,
currently A1, outlook changed to Rating under Review from Stable
..Outlook Action:
....Outlook changed to Rating under Review
from Stable
Issuer: UBS Preferred Funding Company LLC IV
....Backed Preferred Stock Non-cumulative
Shelf, currently (P)Ba1
..No Outlook assigned
Issuer: UBS Group Funding (Jersey) Limited
....Backed Senior Unsecured Medium-Term
Note Program, currently (P)Baa1
..Outlook Action:
....Outlook changed to Rating under Review
from Stable
Issuer: UBS Group Funding (Switzerland) AG
....Backed Preferred Stock Non-cumulative,
currently Ba1(hyb)
....Backed Senior Unsecured Regular Bond/Debenture,
currently Baa1, outlook changed to Rating under Review from Stable
..Outlook Action:
....Outlook changed to Rating under Review
from Stable
The following ratings and rating assessments were affirmed:
Issuer: Credit Suisse Group AG
..Affirmations:
....Senior Unsecured Regular Bond/Debenture,
affirmed Baa2 Stable
....Senior Unsecured Medium-Term Note
Program, affirmed (P)Baa2
....Senior Unsecured Shelf, affirmed
(P)Baa2
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
....Subordinate Shelf, affirmed (P)Baa3
....Preferred Stock Non-cumulative,
affirmed Ba2(hyb)
..Outlook Action:
....Outlook remains Stable
Issuer: Credit Suisse AG
..Affirmations:
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Long-term Bank Deposits,
affirmed A1 Stable
....Short-term Bank Deposits,
affirmed P-1
....Long-term Deposit Note/CD Program,
affirmed (P)A1
....Long-term Issuer Rating,
affirmed A1 Stable
....Senior Unsecured Regular Bond/Debenture,
affirmed A1 Stable
....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
....Other Short Term, affirmed (P)P-1
....Commercial Paper, affirmed P-1
....Adjusted Baseline Credit Assessment,
affirmed baa2
....Baseline Credit Assessment, affirmed
baa2
..Outlook Action:
....Outlook remains Stable
Issuer: Credit Suisse AG (Guernsey) Branch
..Affirmations:
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1 Stable
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Preferred Stock Non-cumulative,
affirmed Ba2(hyb)
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook remains Stable
Issuer: Credit Suisse AG (London) Branch
..Affirmations:
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Long-term Bank Deposit, affirmed
A1 Stable
....Senior Unsecured Regular Bond/Debenture,
affirmed A1 Stable/(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
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook remains Stable
Issuer: Credit Suisse AG (Nassau) Branch
..Affirmations:
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1 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 remains Stable
Issuer: Credit Suisse AG (New York) Branch
..Affirmations:
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Long-term Bank Deposit, affirmed
A1 Stable
....Short-term Bank Deposit,
affirmed P-1
....Long-term Deposit Note/CD Program
Takedown, affirmed A1 Stable
....Senior Unsecured Regular Bond/Debenture,
affirmed A1 Stable
....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
....Commercial Paper, affirmed P-1
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook remains Stable
Issuer: Credit Suisse AG (Sydney) Branch
..Affirmations:
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Short-term Deposit Note/CD Program,
affirmed P-1
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A1
....Senior Unsecured Regular Bond/Debenture,
affirmed A1 Stable
....Commercial Paper, affirmed P-1
..Outlook Action:
....Outlook remains Stable
Issuer: Credit Suisse AG (Tokyo) Branch
..Affirmations:
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A1 Stable
..Outlook Action:
....Outlook remains Stable
Issuer: Credit Suisse (USA) Inc.
..Affirmations:
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed A1 Stable
....Backed Senior Unsecured Medium-Term
Note Program, affirmed (P)A1
....Backed Senior Unsecured Shelf, affirmed
(P)A1
..Outlook Action:
....Outlook remains Stable
Issuer: DLJ Cayman Islands LDC
..Affirmation:
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed A1 Stable
..No Outlook assigned
Issuer: Credit Suisse International
..Affirmations:
....Long-term Counterparty Risk Assessment,
affirmed A1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Backed Long-term Bank Deposit,
affirmed A1 Stable
....Backed Short-term Bank Deposit,
affirmed P-1
....Long-term Issuer Rating,
affirmed A1 Stable
....Backed Senior Unsecured Shelf, affirmed
(P)A1
..Outlook Action:
....Outlook remains Stable
Issuer: Credit Suisse Group Finance (Guernsey) Ltd.
..Affirmation:
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed Baa2 Stable
..Outlook Action:
....Outlook remains 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
..Affirmation:
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed Baa2 Stable
..Outlook Action:
....Outlook remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
September 2017. 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.
Michael Rohr
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
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
