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Swiss Banking System Outlook Raised to Stable by Moody’s

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June 14 (Bloomberg) -- The Swiss banking system’s outlook was raised to stable from negative by Moody’s Investors Service, which cited the “swift” recovery of the country’s economy and improving bank earnings and capital.

“Profitability for the overall banking system has improved and is at a sustainable level, supporting the outlook change to stable,” Carola Schuler, a managing director in Moody’s financial institutions group, said in a statement today. The outlook reflects Moody’s expectations for credit conditions over the next 12 to 18 months.

Switzerland will probably have “solid economic growth with very low unemployment” over the next 12 to 18 months, Moody’s said. While uncertainty over Swiss bank secrecy rules has been reduced by negotiations with the U.K. and Germany about a withholding tax for private-banking clients, it may still weigh on wealth managers as the exact details haven’t been completed, the rating company said.

Moody’s kept a negative outlook on the ratings of UBS AG and Credit Suisse Group AG, Switzerland’s biggest banks, citing challenges in their trading and investment-banking units and the potential for lower support for these banks from the Swiss government. UBS also needs to strengthen client confidence within its wealth management business, the company said.

To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net