Credit rating agencies S&P and Moody's have downgraded their outlook for Swiss bank UBS Group to ‘negative' after its agreed SFr3bn ($3.25bn) takeover of troubled rival Credit Suisse.
S&P and Moody's had both previously rated UBS as ‘stable'.
Explaining the downgrade, S&P said on Monday (20 March) that it saw "material execution risk in integrating Credit Suisse into UBS".
The reason given for this analysis was "the size and weaker credit profile of CS and particularly the complexity in winding down a large part of CS' investment banking operations".
UBS agrees to buy Credit Suisse for $3.3bn
Rival credit rating agency Moody's said today (21 March) that the transaction "poses significant financial, cultural and franchise related integration challenges for UBSG".
This included the need to retain key Credit Suisse personnel while the transaction is underway, and the need to minimise the loss of overlapping clients in its Swiss banking and wealth management businesses.
Another risk, Moody's said, was "the need to unify the cultures of two somewhat different organizations while ensuring that overall risk appetite and controls are both enhanced and or maintained at levels defined by UBSG".
Credit Suisse takeover sparks calls for legal challenges
Despite these issues, Moody's expected "eventual franchise benefits" for UBS. Likewise, S&P added it expected UBS management to "prudently execute" the integration.
The rating agency also said it considered there to be "sufficient buffers to limit emerging risks effectively", thanks in part to the "massive liquidity support" from Switzerland's central bank.
As such, S&P affirmed its issuer credit rating on UBS Group of "A-/A-2".
