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Rating Action:

Moody's reviews for upgrade UBS AG's long-term ratings (Deposits at A1; Senior debt at A2)

12 Oct 2015

New York, October 12, 2015 -- Moody's Investors Service has placed on review for upgrade the long-term ratings of UBS AG and affiliates, including the bank's long-term deposit rating of A1, its senior unsecured debt rating of A2, its standalone baseline credit assessment (BCA) of baa2, its counterparty risk assessment of A1(cr), and the Baa3 rating on the senior unsecured debt of UBS Group Funding (Jersey) Limited guaranteed by the bank's parent holding company, UBS Group AG. The bank's short term ratings and counterparty risk assessment of Prime-1 and Prime-1(cr), respectively, are unaffected by this action.

RATINGS RATIONALE

The review for upgrade was triggered by continued improvements in the bank's leverage ratio as well as recent improvements to the bank's profitability. While UBS's risk-based capital ratios have been the strongest amongst its peers for some time, the bank's leverage ratio has until recently been a relative weakness for the bank. However, increased retained earnings and the recent issuance of high-trigger contingent capital, together with reductions in the bank's balance sheet and leverage exposure, have boosted the bank's leverage ratio to a level more consistent with peers. Moody's believes that the bank's higher leverage ratios are likely to be sustained if, as expected, revisions to Swiss capital requirements later this year raise the bank's leverage ratio requirement.

Profitability at UBS has also been a relative weakness over the last several years, as the bank has borne considerable costs related to litigation, restructuring charges, and the wind-down of its non-core and legacy portfolio. More recent profitability improvements reflect stronger revenue performance and more positive market conditions, but were also driven by fewer litigation charges, lower losses in the bank's non-core and legacy portfolio, and realized cost savings from efficiency initiatives, notwithstanding a continued high volume of restructuring charges.

During its review, Moody's will focus on the trajectory of the bank's profitability improvements as well as the sustainability of those improvements, including the risk of additional litigation charges and the potential for further restructuring charges and costs related to compliance with regulatory initiatives. Moody's will also consider the trajectory for risk-weighted assets under various pending regulatory initiatives as well as the likely trend for the bank's balance sheet in order to assess the sustainability of the bank's current capital position and business mix. Finally, Moody's will assess the likelihood of future earnings volatility and the permanence of the changes made to the bank's risk management and culture since the financial crisis.

UBS's ratings reflect the bank's superior global wealth management and domestic retail and corporate banking franchises, its strong liquidity profile, and its robust risk-based capital ratios. They also reflect the bank's still sizeable (albeit better risk-controlled) capital markets activities, the confidence sensitivity of its client base, the pressures on the bank's profitability and its relatively high historical earnings volatility, and weaknesses in risk management, governance and controls evidenced during the financial crisis. After the financial crisis the bank took steps earlier than most of its peers to significantly scale back some of its fixed income capital markets activities. The directional changes are credit positive, however the investment bank remains a significant source of earnings for the bank at roughly a quarter to a third of current profits, and while its risk taking activities have been constrained, the challenges of managing such a complex and opaque business remain. The bank also remains exposed to a sizeable Non-core and Legacy Portfolio, although as the portfolio is wound down it is expected to pose less risk for the firm.

The principal methodology used in these ratings was Banks published in March 2015. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The following ratings were affected by the rating action:

..Issuer: UBS AG

.... Adjusted Baseline Credit Assessment, Placed on Review for Possible Upgrade, currently baa2

.... Baseline Credit Assessment, Placed on Review for Possible Upgrade, currently baa2

.... Counterparty Risk Assessment, Placed on Review for Possible Upgrade, currently A1(cr)

.... Issuer Rating (Foreign Currency), Placed on Review for Possible Upgrade, currently A2 stable

....Multiple Seniority Deposit Program (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)A1/(P)Baa3

....Multiple Seniority Medium-Term Note Program (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)A2/(P)Baa3

....Subordinate Regular Bond/Debenture (Local Currency), Placed on Review for Possible Upgrade, currently Baa3

....Senior Unsecured Medium-Term Note Program (Local Currency), Placed on Review for Possible Upgrade, currently (P)A2

....Senior Unsecured Medium-Term Note Program (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)A2

....Senior Unsecured Regular Bond/Debenture (Foreign Currency), Placed on Review for Possible Upgrade, currently A2 stable

....Deposit Rating (Foreign Currency), Placed on Review for Possible Upgrade, currently A1 stable

....Deposit Rating (Local Currency), Placed on Review for Possible Upgrade, currently A1 stable

....Senior Unsecured Shelf (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)A2

..Issuer: Swiss Bank Corporation

.... Backed Subordinate Regular Bond/Debenture (Foreign Currency), Placed on Review for Possible Upgrade, currently Baa3

..Issuer: Swiss Bank Corporation, New York Branch

....Backed Subordinate Regular Bond/Debenture (Local Currency), Placed on Review for Possible Upgrade, currently Baa3

..Issuer: UBS AG, Australian Branch

.... Counterparty Risk Assessment, Placed on Review for Possible Upgrade, currently A1(cr)

....Multiple Seniority Medium-Term Note Program (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)A2/(P)Baa3

....Multiple Seniority Medium-Term Note Program (Local Currency), Placed on Review for Possible Upgrade, currently (P)A2/(P)Baa3

....Senior Unsecured Regular Bond/Debenture (Local Currency), Placed on Review for Possible Upgrade, currently A2 stable

..Issuer: UBS AG, Jersey Branch

.... Counterparty Risk Assessment, Placed on Review for Possible Upgrade, currently A1(cr)

....Multiple Seniority Medium-Term Note Program (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)A2/(P)Baa3

....Multiple Seniority Medium-Term Note Program (Local Currency), Placed on Review for Possible Upgrade, currently (P)A2/(P)Baa3

....Subordinate Regular Bond/Debenture (Local Currency), Placed on Review for Possible Upgrade, currently Baa3

....Senior Unsecured Medium-Term Note Program (Local Currency), Placed on Review for Possible Upgrade, currently (P)A2

....Senior Unsecured Medium-Term Note Program (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)A2

....Senior Unsecured Regular Bond/Debenture (Foreign Currency), Placed on Review for Possible Upgrade, currently A2 stable

....Senior Unsecured Shelf (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)A2

..Issuer: UBS AG, London Branch

.... Counterparty Risk Assessment, Placed on Review for Possible Upgrade, currently A1(cr)

....Multiple Seniority Medium-Term Note Program (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)A2/(P)Baa3

....Senior Unsecured Medium-Term Note Program (Local Currency), Placed on Review for Possible Upgrade, currently (P)A2

....Senior Unsecured Medium-Term Note Program (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)A2

....Senior Unsecured Regular Bond/Debenture (Foreign Currency), Placed on Review for Possible Upgrade, currently A2 stable

....Senior Unsecured Regular Bond/Debenture (Local Currency), Placed on Review for Possible Upgrade, currently A2 stable

..Issuer: UBS AG, New York Branch

.... Counterparty Risk Assessment, Placed on Review for Possible Upgrade, currently A1(cr)

....Multiple Seniority Deposit Program (Local Currency), Placed on Review for Possible Upgrade, currently (P)A1/(P)Baa3

....Multiple Seniority Medium-Term Note Program (Local Currency), Placed on Review for Possible Upgrade, currently (P)A2/(P)Baa3

..Issuer: UBS AG, Stamford Branch

.... Counterparty Risk Assessment, Placed on Review for Possible Upgrade, currently A1(cr)

....Multiple Seniority Deposit Program (Local Currency), Placed on Review for Possible Upgrade, currently (P)A1/(P)Baa3

....Multiple Seniority Medium-Term Note Program (Local Currency), Placed on Review for Possible Upgrade, currently (P)A2/(P)Baa3

....Subordinate Regular Bond/Debenture (Local Currency), Placed on Review for Possible Upgrade, currently Baa3

....Senior Unsecured Regular Bond/Debenture (Local Currency), Placed on Review for Possible Upgrade, currently A2 stable

..Issuer: UBS Americas, Inc.

....Backed Issuer Rating, Placed on Review for Possible Upgrade, currently A2 stable

....Backed Senior Unsecured Regular Bond/Debenture (Local Currency), Placed on Review for Possible Upgrade, currently A2 stable

....Backed Senior Unsecured Shelf (Local Currency), Placed on Review for Possible Upgrade, currently (P)A2

..Issuer: UBS Capital Securities (Jersey) LTD

....Backed Pref. Stock Non-cumulative Preferred Stock (Foreign Currency), Placed on Review for Possible Upgrade, currently Ba2 (hyb)

..Issuer: UBS Finance (Curacao) N.V.

....Backed Senior Unsecured Regular Bond/Debenture (Foreign Currency), Placed on Review for Possible Upgrade, currently A2 stable

..Issuer: UBS Group Funding (Jersey) Limited

....Backed Senior Unsecured Regular Bond/Debenture (Foreign Currency), Placed on Review for Possible Upgrade, currently Baa3 stable

..Issuer: UBS Limited

.... Issuer Rating, Placed on Review for Possible Upgrade, currently A2 stable

.... Issuer Rating (Local Currency), Placed on Review for Possible Upgrade, currently A2 stable

..Issuer: UBS Preferred Funding Company LLC IV

....Backed Pref. Stock Non-cumulative Shelf (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)Ba2

..Issuer: UBS Preferred Funding Company LLC V

....Backed Pref. Stock Non-cumulative Shelf (Foreign Currency), Placed on Review for Possible Upgrade, currently (P)Ba2

..Issuer: UBS Preferred Funding Trust IV

....Backed Pref. Stock Non-cumulative Preferred Stock (Local Currency), Placed on Review for Possible Upgrade, currently Ba2 (hyb)

....Backed Pref. Stock Non-cumulative Shelf (Local Currency), Placed on Review for Possible Upgrade, currently (P)Ba2

..Issuer: UBS Preferred Funding Trust V

....Backed Pref. Stock Non-cumulative Preferred Stock (Local Currency), Placed on Review for Possible Upgrade, currently Ba2 (hyb)

....Backed Pref. Stock Non-cumulative Shelf (Local Currency), Placed on Review for Possible Upgrade, currently (P)Ba2

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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

David Fanger
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's reviews for upgrade UBS AG's long-term ratings (Deposits at A1; Senior debt at A2)
No Related Data.
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