DBRS Confirms Credit Suisse Group at AA, Trend Remains Negative

DBRS has today confirmed its ratings for Credit Suisse Group (Credit Suisse or the Group) and related entities, including its Senior Unsecured Long-Term Debt rating of AA. The confirmation of the ratings considers the Group’s 2009 performance, its near-to-intermediate term prospects, and the current operating environment. The trend on all ratings was maintained at Negative where it was placed on 12 February 2009. In confirming the ratings, DBRS recognizes the strength of Credit Suisse’s leading private banking franchise, its extensive investment banking businesses and its successful core asset management businesses. Demonstrating the earnings power of its franchise, Credit Suisse generated earnings of CHF6.7 billion, as it rebounded from its loss of CHF8.2 billion in 2008.

Leveraging Credit Suisse’s strong brand name and its leading position in Switzerland, the Group’s businesses showed their resiliency in its solid 2009 results. Within its private banking businesses, the Group’s expanding Wealth Management franchise is among the market leaders globally. Providing extensive retail and corporate banking services, the Private Banking businesses in Switzerland are a strong domestic base. Benefiting from Credit Suisse’s overall strength, its extensive investment banking businesses have rebounded, as the Group repositions these businesses to generate more stable earnings, while competing successfully in the global capital markets. In Asset Management, the Group has focused on business lines where it has competitive advantages and efficiently reduced its involvement in less attractive lines.

The ratings confirmation also reflects Credit Suisse’s strengthened financial profile. DBRS views the Group’s liquidity as robust. With its well-positioned domestic banking franchise, the Group has a sound funding profile with ample deposits to fund its lending and market funding for its businesses that is appropriately diversified across sources and maturities. Indicative of the Group’s strong position, it did not need to utilize government guarantees during the crisis and has been able to lengthen its debt maturity profile. Reductions in the Group’s risk exposures and the repositioning of its Investment Bank (IB) have improved its risk profile. When combined with additional capital, this risk reduction has strengthened the Group’s capitalization, as indicated by Credit Suisse’s high regulatory capital ratios. Positive earnings and more efficient use of risk capacity are expected to maintain this much stronger capitalization.

In retaining the Negative trend, DBRS considers the continued stress in the current environment. Financial markets remain fragile with ongoing episodes of stress, most recently reflecting concerns about sovereign credits and the uneven economic recovery. At the same time, the economic recovery is not demonstrating sufficient strength to rapidly improve credit problems in struggling economies and reduce uncertainty about economic prospects. With its large international operations, the Group is also exposed to the potentially adverse consequences of changes in the regulatory framework for banks and financial institutions that have the potential to have a greater impact following the crisis. Operational risks associated with running a large private bank across jurisdictions are substantial and present meaningful risks in the current environment. While DBRS views Credit Suisse as being well prepared for likely changes, more substantial constraints on business practices than expected, such as limits on types of activity and increased costs of compliance, could still impact its businesses.

Following a solid 2009 performance and continued progress on executing on its integrated bank strategy, DBRS’s next rating action is more likely to be a reversion to a Stable trend. This reversion is more likely to occur to the extent that Credit Suisse demonstrates sustained improvement in its financial results across its businesses. Certain businesses, notably Asset Management, are not yet producing the consistent operating performance expected for such a highly rated institution.

Note:
All figures are in Swiss francs unless otherwise noted.

The applicable methodologies are Global Methodology for Rating Banks and Banking Organisations and Rating Bank Preferred Shares and Equivalent Hybrids, which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.

This rating is based on public information.