Moody's changes Credit Suisse outlook to stable

Moody's Investors Service said it changed back to stable from negative the outlook for the Aa3 senior debt ratings of Credit Suisse Group, the Aa3 long-term deposit and senior debt ratings of Credit Suisse and Credit Suisse First Boston, and the A1 insurance financial strength rating of Winterthur Insurance.

The outlooks for both the B financial strength rating of Credit Suisse and the C financial strength rating of CSFB remain stable.

According to Moody's, the rating outlook change reflects the favorable evolution of the group's various businesses in recent quarters, leading to a return to better levels of sustainable operating profitability, notably at the legal entities CSFB and Winterthur - which had raised more concerns in the past.

Credit Suisse Group continues to benefit from large and solid client franchises which have enabled it to return to profitability after sustaining massive losses at Winterthur during last year. In particular, Moody's said that it views the group's private banking business as a core strength - as Credit Suisse Private Banking remains one of the leading players worldwide.

With respect to the insurance company Winterthur, Moody's said that, in the wake of large asset divestitures, the company is now increasingly focusing on retail clients, mainly in Switzerland and in Germany, where it has critical masse. As such, the company has materially strengthened its solvency and lowered its risk profile.

Despite large-scale personnel reductions, the investment bank CSFB has preserved its client franchises and retained its top-tier positions in several key investment banking categories. Operating expenses have tumbled down owing to substantial staff cuts and the near complete amortization of the retention payments related to the acquisition in 2000 of the U.S. broker dealer DLJ. Moody's said the reduction of the guaranteed portion of the incentive-based compensation affords CSFB much greater financial flexibility.

Also positive, CSFB has significantly lowered its risk profile, a development which is visible with respect to both credit and market risk indicators, the agency said.

"Legacy" items - non-core assets of which CSFB is divesting with respect to real estate, distressed debt and private equity - were sharply marked down last year and no longer weigh on net profit. Moody's said that it views CSFB as better positioned to deliver a financial performance which is more comparable with peers.

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