Prime-1 Short-term Ratings Affirmed
London, 15 June 2009 -- Moody's Investors Service today placed the long-term debt and deposit
ratings of UBS AG and affiliates (deposits and senior debt at Aa2,
subordinated at Aa3, trust preferred and capital securities at A1)
on review for possible downgrade. Moody's bank financial
strength rating (BFSR) for UBS of B- was also put on review.
The B- BFSR translates into a baseline credit assessment of A1.
The Prime-1 ratings on the short-term obligations of UBS
AG and affiliates were affirmed.
"The review reflects Moody's view of the considerable challenges
that UBS continues to face in its two largest business lines: Investment
Banking and Wealth Management," said David Fanger, Moody's
Senior Vice President. Moody's believes these challenges
are unlikely to be short-lived, and pose greater risk to
bondholders than it had previously believed. In addition,
while the bank has benefited from substantial capital infusions over the
past two years, the bank's ability to generate capital internally
remains challenged.
"Given the magnitude of the bank's challenges and the length
of time it may take to fully address them, the bank's ratings
are vulnerable to a downgrade of more than one notch," said
Mr. Fanger. This is especially true for the bank's
BFSR. However, because of the bank's high degree of
systemic importance, any downgrade of the bank's deposit and
senior debt ratings is likely to be limited to one or two notches at most,
consistent with Moody's existing bank rating methodologies as well
as its recent special comment ("Calibrating Bank Ratings in the
Context of the Global Financial Crisis," February 2009).
"A widening of the gap between the rating on the bank's senior
unsecured debt and the ratings on its junior subordinated and hybrid capital
instruments is also possible," Mr. Fanger noted.
In Investment Banking, although UBS has sold a considerable portion
($39 billion) of its legacy exposures to the Swiss National Bank
(SNB), it remains exposed to potential additional losses on its
remaining legacy exposures, most notably in its exposures to the
monoline financial guarantors. In addition, in Moody's
opinion the bank appears to have benefited less than many of its peers
from the recent improvement in trading margins and volumes among more
liquid capital markets instruments. "The bank has also experienced
a significant turnover of senior managers over the past two years,
which gives us some concerns about the continuity and effectiveness of
management," Mr. Fanger added.
Moody's views UBS's leading Wealth Management franchise as
a critical underpinning of its overall financial strength. However,
the bank's sizeable losses appear to have contributed to an erosion
of customer confidence in this business. This was most apparent
in the outflow of net new funds experienced during the fall of 2008.
That outflow diminished after the bank agreed to sell assets to the SNB
and issue a mandatory convertible note to the Swiss Confederation.
However, Moody's believes that were the bank to suffer additional
losses on its remaining legacy exposures it could potentially further
undermine customer confidence.
UBS's Wealth Management franchise also faces challenges due to customer
concerns over privacy, as evidenced by continued net money outflows
during the first quarter of 2009. These concerns were fuelled by
demands made of UBS by U.S. authorities regarding the sharing
of customer information, and by the responses of the Swiss government
to those demands as well as to the demands of the OECD and the European
Union. "Repairing this damage may take time, Mr.
Fanger said, "especially in light of the legal obstacles UBS
faces in reconciling the competing demands of U.S. and Swiss
authorities over bank secrecy." At the same time, revenues
in Wealth Management are also under pressure due to market-driven
declines in assets under management and reduced client activity.
Moody's believes that this leaves the bank with more limited financial
flexibility to manage its challenges.
The review will focus on the bank's vulnerability to any further
loss of customers in its wealth management franchise, its future
earnings prospects under expected and stress scenarios, and its
strategic direction. The review will also consider the potential
effectiveness of the changes the bank has made to its risk management
processes and oversight. However, the rating agency believes
the significant losses at many wholesale investment banks over the past
two years, combined with the increased complexity and opacity of
their positions, argue for skepticism about the robustness of risk
management within the industry. (See Moody's October 2008
special comment "Impact of the Credit Crisis on Moody's Rating Methodology
and the Credit Profiles of Investment Banks.")
Moody's previous rating action on UBS AG was on 17 October 2008
when Moody's affirmed the ratings of UBS AG following the bank's
announcement that it had agreed to sell of up to $60 billion of
legacy assets to the Swiss National Bank and to issue CHF6 billion of
mandatory convertible notes to be purchased by the Swiss Confederation.
The principal methodologies used in rating UBS AG are "Bank Financial
Strength Ratings: Global Methodology" and "Incorporation of Joint-Default
Analysis into Moody's Bank Ratings: A Refined Methodology",
which can be found on www.moodys.com in the Credit Policy
& Methodologies directory, in the Ratings Methodologies subdirectory.
Other methodologies and factors that may have been considered in the process
of rating UBS AG can also be found in the Credit Policy & Methodologies
directory.
The following ratings were affected:
On Review for Possible Downgrade:
..Issuer: Edelweiss Master Trust
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa2
..Issuer: Swiss Bank Corporation
....Subordinate Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa3
..Issuer: Swiss Bank Corporation, New York Branch
....Subordinate Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa3
..Issuer: UBS AG
....Bank Financial Strength Rating,
Placed on Review for Possible Downgrade, currently B-
....Issuer Rating, Placed on Review
for Possible Downgrade, currently Aa2
....Multiple Seniority Deposit Program,
Placed on Review for Possible Downgrade, currently Aa3
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
Aa3
....Subordinate Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa3
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
Aa2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently (P)Aa2
....Senior Unsecured Deposit Rating,
Placed on Review for Possible Downgrade, currently Aa2
....Senior Unsecured Shelf, Placed on
Review for Possible Downgrade, currently (P)Aa2
..Issuer: UBS AG, Australian Branch
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
Aa3
..Issuer: UBS AG, Jersey Branch
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
Aa3
....Subordinate Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa3
....Senior Unsecured Conv./Exch.
Bond/Debenture, Placed on Review for Possible Downgrade, currently
Aa2
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
Aa2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently (P)Aa2
....Senior Unsecured Shelf, Placed on
Review for Possible Downgrade, currently (P)Aa2
..Issuer: UBS AG, London Branch
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
Aa3
....Senior Unsecured Conv./Exch.
Bond/Debenture, Placed on Review for Possible Downgrade, currently
Aa2
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
Aa2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa2
..Issuer: UBS AG, New York Branch
....Multiple Seniority Deposit Program,
Placed on Review for Possible Downgrade, currently Aa3
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
Aa3
..Issuer: UBS AG, Stamford Branch
....Multiple Seniority Deposit Program,
Placed on Review for Possible Downgrade, currently Aa3
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
Aa3
....Subordinate Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa3
....Senior Unsecured Deposit Note/Takedown,
Placed on Review for Possible Downgrade, currently Aa2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa2
..Issuer: UBS Americas, Inc.
....Issuer Rating, Placed on Review
for Possible Downgrade, currently Aa2
....Junior Subordinated Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa3
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
Aa3
....Multiple Seniority Shelf, Placed
on Review for Possible Downgrade, currently (P)Aa3
....Subordinate Medium-Term Note Program,
Placed on Review for Possible Downgrade, currently Aa3
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
Aa2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa2
....Senior Unsecured Shelf, Placed on
Review for Possible Downgrade, currently (P)Aa2
..Issuer: UBS Capital Securities (Jersey) LTD
....Preferred Stock Preferred Stock,
Placed on Review for Possible Downgrade, currently A1
..Issuer: UBS Finance (Curacao) N.V.
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa2
..Issuer: UBS Finance (Delaware), LLC.
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
Aa2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa2
..Issuer: UBS Limited
....Issuer Rating, Placed on Review
for Possible Downgrade, currently Aa2
..Issuer: UBS Loan Finance LLC
....Issuer Rating, Placed on Review
for Possible Downgrade, currently A1
..Issuer: UBS Preferred Funding (Jersey) Ltd.
....Preferred Stock Preferred Stock,
Placed on Review for Possible Downgrade, currently A1
..Issuer: UBS Preferred Funding Co. LLC VII
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Company LLC I
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Company LLC II
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Company LLC IV
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Company LLC IX
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Company LLC V
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Company LLC VI
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Company LLC VIII
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Trust I
....Preferred Stock Preferred Stock,
Placed on Review for Possible Downgrade, currently A1
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Trust II
....Preferred Stock Preferred Stock,
Placed on Review for Possible Downgrade, currently A1
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Trust IV
....Preferred Stock Preferred Stock,
Placed on Review for Possible Downgrade, currently A1
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Trust IX
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Trust V
....Preferred Stock Preferred Stock,
Placed on Review for Possible Downgrade, currently A1
..Issuer: UBS Preferred Funding Trust VI
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Trust VII
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: UBS Preferred Funding Trust VIII
....Preferred Stock Shelf, Placed on
Review for Possible Downgrade, currently (P)A1
..Issuer: Union Bank of Switzerland
....Subordinate Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa3
Outlook Actions:
..Issuer: Edelweiss Master Trust
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS AG
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS AG, Australian Branch
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS AG, Jersey Branch
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS AG, London Branch
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS AG, New York Branch
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS AG, Stamford Branch
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Americas, Inc.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Capital Securities (Jersey) LTD
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Finance (Curacao) N.V.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Finance (Delaware), LLC.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Limited
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Loan Finance LLC
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding (Jersey) Ltd.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Co. LLC VII
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Company LLC I
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Company LLC II
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Company LLC IV
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Company LLC IX
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Company LLC V
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Company LLC VI
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Company LLC VIII
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Trust I
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Trust II
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Trust IV
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Trust IX
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Trust V
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Trust VI
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Trust VII
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: UBS Preferred Funding Trust VIII
....Outlook, Changed To Rating Under
Review From Stable
UBS AG is headquartered in Zurich, Switzerland. At the end
of March 2009, UBS had total consolidated assets of CHF 1,861
billion and total equity of CHF 39.7 billion pursuant to IFRS.
For the first three months of 2009, UBS reported a net after-tax
loss attributable to shareholders of CHF 1,975 million.
New York
David Fanger
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
London
Johannes Wassenberg
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's places UBS on review for downgrade
