Moody's Downgrades UBS Outlook to Negative Following Credit Suisse Takeover
Date
3/21/2023 7:58:50 AM
(MENAFN) Credit rating agency Moody's has downgraded the outlook for Swiss banking giant UBS to negative from stable after its takeover of troubled rival Credit Suisse. Moody's affirmed the A3 senior unsecured debt and Baa3 Additional Tier 1 ratings of UBS Group AG but changed the outlooks on the long-term deposit and senior unsecured ratings to negative from stable. UBS announced its intentions to acquire Credit Suisse for 3 billion Swiss francs (USD3.25 billion) late on Sunday, while the Swiss government guaranteed to assume losses up to 9 billion francs from assets.
Moody's stated in a statement that the action balances on the advantageous financial terms in terms of liquidity and capital together with the long-term potential for franchise enhancement, and on the other hand, the complexity, extent, and duration of the integration. The deal is aimed at reducing the operating costs of UBS Group by over USD8 billion and boosting the banking giant's franchise in wealth management, Swiss banking, asset management, and, to a lesser degree, investment banking.
The acquisition of Credit Suisse by UBS is expected to bring various benefits, but Moody's has highlighted concerns about the integration process. The complexity, extent, and duration of the integration have raised questions about the ability of UBS to seamlessly integrate Credit Suisse into its operations. Moody's has also noted the advantageous financial terms in terms of liquidity and capital, which will provide UBS with much-needed financial stability.
Despite these concerns, UBS remains committed to the acquisition, which is expected to strengthen its position in the Swiss banking sector and bolster its wealth management business. The takeover is also expected to provide UBS with significant cost savings, which will help to improve its profitability in the long run. The Swiss government's guarantee to assume losses up to 9 billion francs from assets has provided further support to the acquisition.
Overall, the Moody's downgrade of UBS's outlook to negative reflects concerns about the integration process following the acquisition of Credit Suisse. However, UBS remains confident that it can successfully integrate Credit Suisse into its operations and achieve its strategic objectives. The acquisition is expected to provide significant benefits to UBS, including bolstering its position in the Swiss banking sector and improving its profitability in the long run.
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