UBS Group AG was upgraded by S&P Global Ratings, which cited the Swiss bank’s efforts to shrink its balance sheet and switch its emphasis to wealth management from investment banking.
The lender was raised from BBB+ to A-, the seventh-highest investment grade, according to a statement from S&P Monday. For the bank to get more upgrades, litigation risks from past misconduct must subside and the bank will need to be “comfortably” reaching financial targets, S&P said.
The “wealth-management-focused business model, cohesive group strategy and successful deleveraging have improved the underlying creditworthiness of the group and its core subsidiaries,” the ratings agency said in its statement.
UBS, based in Zurich, has shrunk its assets to 967 billion Swiss francs ($996 billion) at the end of the first quarter from
1.42 trillion francs at the end of 2011. The UBS Group holding company, which became operational in the fourth quarter of 2014, was first rated in February 2015 by S&P and assigned the BBB+ rating. S&P changed its outlook to positive from stable in December.
S&P said UBS should be able to deliver “satisfactory” returns for investors without further changes to the bank’s plan to focus on wealth management, first announced in 2012.
“Most divisions operate at the weaker end of group efficiency targets,” S&P said in the report. “We believe that this is largely due to the low and negative-interest rate environment, and note continued efforts and investment to sustainably reduce the cost base.”
Chief Executive Officer Sergio Ermotti told analysts last month that the bank is on track to cut costs by 1.4 billion francs by the end of June under a plan announced in 2014.
(Updates with bank’s balance sheet and cost-cutting plans from fourth paragraph.)