Deposit ratings upgraded to Aa2, Baseline Credit Assessment (BCA) upgraded to a3
Frankfurt am Main, June 18, 2018 -- Moody's Investors Service has today upgraded UBS AG's long-term
deposit ratings to Aa2, from Aa3, and its long-term
issuer and senior unsecured debt ratings to Aa3, from A1.
The outlook on the long-term deposit and senior unsecured ratings
of UBS AG was changed to stable from rating under review.
The rating agency further upgraded UBS AG's Baseline Credit Assessment
(BCA) and its Adjusted BCA to a3, from baa1, as well as the
bank's Counterparty Risk (CR) Assessment and Counterparty Risk Ratings
to Aa2(cr) and Aa2, from Aa3(cr) and Aa3, respectively.
At the same time, Moody's upgraded the bank's and the group entities'
other long-term ratings, and affirmed all of the bank's and
the group entities' P-1 short-term ratings, where
applicable. The rating agency further confirmed UBS Group Funding
(Switzerland) AG's Ba1(hyb) preferred stock ratings.
Today's rating actions conclude the review of UBS's ratings for upgrade
which was initiated on 5 April 2018.
For a full list of all affected ratings, please refer to the end
of this press release.
RATINGS RATIONALE
The various upgrades of UBS's long-term ratings reflect Moody's
belief that the risks and greater earnings volatility inherent in the
group's remaining capital markets activities is likely to be sufficiently
mitigated by its large global wealth and asset management as well as Swiss
universal banking businesses going forward. The rating agency believes
that these stable businesses provide solid 'shock absorbers' and sufficient
loss absorption capacity safeguarding the group's profitability and capital
position even under more adverse market conditions.
The upgrade further takes account of the rating agency's assessment of
risks taken within UBS's restructured and refocused investment bank after
the meaningful restructuring that has taken place within this business
segment. In Moody's view, UBS management actions have 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. Moreover, Moody's believes
that potential additional litigation charges, which could arise
from legacy cases, are unlikely to meaningfully negatively affect
UBS's solid capitalization level and metrics, considering the improving
group profitability and significant provisions that UBS has established
during the prior years.
In addition, over the last few years, there has been maturation
and greater embedding of the group's revised risk governance framework
over and across its various business segments, which supports the
group's improved credit profile. In particular, Moody's views
the firm's business planning and capital allocation as well as distribution
processes as sufficiently constrained by the outputs of its board-approved
capital management and stress testing framework. In this regard,
UBS aims to maintain a common equity Tier 1 (CET1) capital ratio of around
13% during the 2018-20 period.
UBS's rating upgrade was also backed by the bank's 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 investment banking (GIB) 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.
In upgrading the ratings, Moody's also maintained its assumption
of a moderate probability of government support for junior depositors
and senior unsecured creditors to be forthcoming at the operating company
level, in case of need. This assumption continues to lead
to one notch of additional rating uplift for the bank's and its subsidiaries'
as well as branches' deposit and senior debt ratings.
WHAT COULD CHANGE THE RATING UP/DOWN
UBS AG's BCA and long-term ratings could be upgraded if UBS (1)
further improved, sustained and defended its earnings profile as
well as profitability levels even under less benign market conditions;
(2) achieved an even greater reduction of risks within its capital markets
segment and (3) further built on its solid capital position while still
balancing bondholders' and shareholders' interests.
Additional supportive factors to UBS's BCA may derive from UBS growing
and sustaining its solid profitability levels in a risk prudent way,
as well as materially decreasing its reliance on wholesale funding sources.
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.
UBS AG's BCA could face downward pressure if the bank were to suffer from
any control or risk management failure, if there were a significant
decline in the Swiss economy, or if UBS were to materially increase
its risk appetite - evidence of which could be a significant expansion
of the investment banking franchise or a stepping back from its well-established
group risk management and stress testing framework - or if there
were a meaningful deterioration in the bank's capital or liquidity profiles.
UBS's ratings could further be downgraded should there be a significant
and larger-than-anticipated decrease in the bank's existing
bail-in-able debt cushion leading to a higher loss severity
for its various debt classes. Although regarded as 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
Issuer: UBS AG
..Upgrades:
....Long-term Bank Deposits,
upgraded to Aa2 Stable from Aa3 Rating under Review
....Long-term Deposit Note/CD Programme,
upgraded to (P)Aa2 from (P)Aa3
....Long-term Counterparty Risk Assessment,
upgraded to Aa2(cr) from Aa3(cr)
....Long-term Counterparty Risk Ratings,
upgraded to Aa2 from Aa3
....Long-term Issuer Rating,
upgraded to Aa3 Stable from A1 Rating under Review
....Baseline Credit Assessment, upgraded
to a3 from baa1
....Adjusted Baseline Credit Assessment,
upgraded to a3 from baa1
....Senior Unsecured Regular Bond/Debenture,
upgraded to Aa3 Stable from A1 Rating under Review
....Senior Unsecured Medium-Term Note
Program, upgraded to (P)Aa3 from (P)A1
....Senior Unsecured Shelf, upgraded
to (P)Aa3 from (P)A1
....Subordinate Deposit Note/CD Program,
upgraded to (P)Baa1 from (P)Baa2
....Subordinate Medium-Term Note Program,
upgraded to (P)Baa1 from (P)Baa2
..Affirmations:
....Short-term Bank Deposits,
affirmed P-1
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook changed to Stable from Rating
under Review
Issuer: Swiss Bank Corporation
..Upgrade:
....Backed Subordinate Regular Bond/Debenture,
upgraded to Baa1 from Baa2
..No Outlook assigned
Issuer: Swiss Bank Corporation, New York Branch
..Upgrades:
....Backed Subordinate Regular Bond/Debenture,
upgraded to Baa1 from Baa2
..No Outlook assigned
Issuer: UBS AG, Australian Branch
..Upgrades:
....Long-term Counterparty Risk Assessment,
upgraded to Aa2(cr) from Aa3(cr)
....Long-term Counterparty Risk Ratings,
upgraded to Aa2 from Aa3
....Senior Unsecured Regular Bond/Debenture,
upgraded to Aa3 Stable from A1 Rating under Review
....Senior Unsecured Medium-Term Note
Program, upgraded to (P)Aa3 from (P)A1
....Subordinate Medium-Term Note Program,
upgraded to (P)Baa1 from (P)Baa2
..Affirmations:
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Backed Commercial Paper, affirmed
P-1
..Outlook Action:
....Outlook changed to Stable from Rating
under Review
Issuer: UBS AG, Jersey Branch
..Upgrades:
....Long-term Counterparty Risk Assessment,
upgraded to Aa2(cr) from Aa3(cr)
....Long-term Counterparty Risk Ratings,
upgraded to Aa2 from Aa3
....Senior Unsecured Regular Bond/Debenture,
upgraded to Aa3 Stable from A1 Rating under Review
....Senior Unsecured Medium-Term Note
Program, upgraded to (P)Aa3 from (P)A1
....Senior Unsecured Shelf, upgraded
to (P)Aa3 from (P)A1
....Subordinate Regular Bond/Debenture,
upgraded to Baa1 from Baa2
....Subordinate Medium-Term Note Program,
upgraded to (P)Baa1 from (P)Baa2
..Affirmations:
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook changed to Stable from Rating
under Review
Issuer: UBS AG, London Branch
..Upgrades:
....Long-term Counterparty Risk Assessment,
upgraded to Aa2(cr) from Aa3(cr)
....Long-term Counterparty Risk Ratings,
upgraded to Aa2 from Aa3
....Senior Unsecured Regular Bond/Debenture,
upgraded to Aa3 Stable from A1 Rating under Review
....Senior Unsecured Medium-Term Note
Program, upgraded to (P)Aa3 from (P)A1
....Subordinate Medium-Term Note Program,
upgraded to (P)Baa1 from (P)Baa2
..Affirmations:
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Short-term Deposit Note/CD Program,
affirmed P-1
....Commercial Paper, affirmed P-1
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook changed to Stable from Rating
under Review
Issuer: UBS AG, New York Branch
..Upgrades:
....Long-term Counterparty Risk Assessment,
upgraded to Aa2(cr) from Aa3(cr)
....Long-term Counterparty Risk Ratings,
upgraded to Aa2 from Aa3
....Long-term Deposit Note/CD Program,
upgraded to (P)Aa2 from (P)Aa3
....Senior Unsecured Medium-Term Note
Program, upgraded to (P)Aa3 from (P)A1
....Subordinate Deposit Note/CD Program,
upgraded to (P)Baa1 from (P)Baa2
....Subordinate Medium-Term Note Program,
upgraded to (P)Baa1 from (P)Baa2
..Affirmations:
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Other Short Term, affirmed (P)P-1
..No Outlook assigned
Issuer: UBS AG, Stamford Branch
..Upgrades:
....Long-term Counterparty Risk Assessment,
upgraded to Aa2(cr) from Aa3(cr)
....Long-term Counterparty Risk Ratings,
upgraded to Aa2 from Aa3
....Long-term Deposit Note/CD Program,
upgraded to (P)Aa2 from (P)Aa3
....Senior Unsecured Regular Bond/Debenture,
upgraded to Aa3 Stable from A1 Rating under Review
....Senior Unsecured Medium-Term Note
Program, upgraded to (P)Aa3 from (P)A1
....Subordinate Deposit Note/CD Program,
upgraded to (P)Baa1 from (P)Baa2
....Subordinate Medium-Term Note Program,
upgraded to (P)Baa1 from (P)Baa2
..Affirmations:
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Commercial Paper, affirmed P-1
....Other Short Term, affirmed (P)P-1
..Outlook Action:
....Outlook changed to Stable from Rating
under Review
Issuer: UBS Americas, Inc.
..Upgrades:
....Backed Long-term Issuer Rating,
upgraded to Aa3 Stable from A1 Rating under Review
..Affirmation:
....Backed Commercial Paper, affirmed
P-1
..Outlook Action:
....Outlook changed to Stable from Rating
under Review
Issuer: UBS Finance (Curacao) N.V.
..Upgrade:
....Backed Senior Unsecured Regular Bond/Debenture,
upgraded to Aa3 Stable from A1 Rating under Review
..Outlook Action:
....Outlook changed to Stable from Rating
under Review
Issuer: UBS Finance (Delaware), LLC.
..Affirmation:
....Backed Commercial Paper, affirmed
P-1
..No Outlook assigned
Issuer: UBS Limited
..Upgrades:
....Long-term Issuer Ratings,
upgraded to Aa3 Stable from A1 Rating under Review
....Long-term Counterparty Risk Assessment,
upgraded to Aa2(cr) from Aa3(cr)
....Long-term Counterparty Risk Ratings,
upgraded to Aa2 from Aa3
..Affirmations:
....Short-term Issuer Ratings,
affirmed P-1
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Short-term Counterparty Risk Ratings,
affirmed P-1
..Outlook Action:
....Outlook changed to Stable from Rating
under Review
Issuer: UBS Group Funding (Jersey) Limited
..Upgrades:
....Backed Senior Unsecured Medium-Term
Note Program, upgraded to (P)A3 from (P)Baa1
..Outlook Action:
....Outlook changed to Stable from Rating
under Review
Issuer: UBS Group Funding (Switzerland) AG
..Upgrades:
....Backed Senior Unsecured Regular Bond/Debenture,
upgraded to A3 Stable from Baa1 Rating under Review
..Confirmations:
....Backed Preferred Stock Non-cumulative,
confirmed at Ba1(hyb)
..Outlook Action:
....Outlook changed to Stable from Rating
under Review
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
June 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.
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
