Credit Suisse and UBS: Fitch sets outlook on ‘negative’ | 3/31/20

The rating agency Fitch took a close look at the ratings of a total of seven Swiss banking groups due to the distortions caused by the corona crisis.

The corresponding rating outlook has been lowered for the major banks CS and UBS.

According to Tuesday’s announcement, Fitch has confirmed the long-term issuer default ratings (IDR) of Credit Suisse (A-) and UBS (A +), but has set the outlook to ‘negative’. So far, this has been ‘positive’ at CS and ‘neutral’ at UBS. The rating of Corner Banca SA (BBB +) was also confirmed with a new outlook.

In the meantime, the rating ‘A’ of EFG International AG has been added to the watch list for a downgrading (Rating Watch Negative). The ratings of Banque Pictet (AA-), Lombard Odier (AA-) and ZKB (AAA) were also confirmed with stable prospects.

Although the effects of the coronavirus outbreak on the economy and the financial markets are hardly foreseeable, Fitch wrote in the communication, but the risks to the credit profile of the banks mentioned are clearly downward. The agency therefore believes that global economic growth will slow sharply in 2020, with downside risks increasing.

Asset quality should decline

Switzerland has decided to take support measures for the private sector and the financial markets, which should have positive effects on the banks as a whole. The state-guaranteed loans to SMEs, which are provided by the banks and financed through a special facility set up by the Swiss National Bank (SNB), should support the viability of companies and thus the quality of their assets.

And the simplifications in calculating the leverage ratio and disabling the countercyclical buffer by regulators should free up some capital to make lending easier. Nevertheless, Fitch believes the quality of assets is likely to weaken, primarily due to falling earnings due to weaker business volume and increasing loan write-offs.

uh / jb

Zurich / London (awp)

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