Moody’s revises UBS outlook to negative

Moody’s Investors Service said it revised its outlook for UBS Group AG to negative from stable and affirmed its A3 senior unsecured and Baa3(hyb) additional tier one ratings. The agency also affirmed the Aa3 long-term senior unsecured debt rating of the group’s principal banking unit UBS AG.

The outlook revision and rating affirmations follow UBS agreeing to acquire Credit Suisse Group AG in an all-stock deal, the agency said. The transaction is expected to close in the second quarter of 2023.

The acquisition poses major financial, cultural and franchise-related integration challenges for UBSG, including the need to keep key CSG personnel while the transaction is underway, the need to minimize the loss of overlapping clients in its Swiss banking and wealth management businesses, and to unify the organizations’ cultures while ensuring that overall risk appetite and controls are both enhanced and or maintained at levels defined by UBSG, the agency said.

On the positive side, “Moody's believes that the acquisition of CSG has the potential, in due course, to significantly enhance UBSG's franchise in wealth management, Swiss banking, asset management and to a lesser degree in investment banking, whilst targeting a reduction of operating costs by more than $8 billion,” the agency said.

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