Credit Suisse Group AG, the second-biggest Swiss bank, may have its long-term credit rating cut by Moody’s Investors Service after the investment banking unit posted a loss and income at the wealth-management division fell.
The ratings company put Credit Suisse AG’s Aa1 rating and Credit Suisse Group AG’s Aa2 rating on review for a downgrade, Moody’s said in a statement today. The Zurich-based lender’s results were “more volatile” than peers and its year-to-date returns compared with risk weighted assets were weaker.
Credit Suisse said Nov. 1 it will cut about 1,500 more jobs and reorganize its securities unit after the division reported its first quarterly loss since 2008. Earnings at the private bank slumped 78 percent after the bank made 478 million francs ($526 million) of litigation provisions for tax settlements in Germany and the U.S.
“The need for further restructuring is driven by both the continuing macroeconomic uncertainty and the increased pressure on shareholder returns that is likely to result from higher regulatory capital requirements,” Moody’s Senior Vice President David Fanger said in the statement. “Credit Suisse has become more reliant on its investment banking business, at a time when that business is also under significant pressure.”
Credit Suisse’s fixed income sales and trading revenue shrank by more than most of its peers, reflecting the lenders’ reliance on credit and mortgage trading, Moody’s said. The strong Swiss franc, low interest rates and cautious client environment also eroded profit at its private bank, the ratings company said.