Ratings On All Swiss Banks Affirmed

Outlook On Nine Swiss Banks To Negative On
Exposure To Rising Property Prices; Ratings On
All Swiss Banks Affirmed
Primary Credit Analysts:
Dirk Heise, Frankfurt (49) 69-33-999-163; dirk_heise@standardandpoors.com
Markus Schmaus, Frankfurt (49) 69-33-999-155; markus_schmaus@standardandpoors.com
Secondary Contacts:
Salla von Steinaecker, Frankfurt (49) 69-33-999-164; salla_vonsteinaecker@standardandpoors.com
Thierry Grunspan, Paris (33) 1-4420-6739; thierry_grunspan@standardandpoors.com
Francois Moneger, Paris (33) 1-4420-6688; francois_moneger@standardandpoors.com
Giles Edwards, London (44) 20-7176-7014; giles_edwards@standardandpoors.com
Stephanie Carillon, Paris (33) 1-4420-7344; stephanie_carillon@standardandpoors.com
Sean Cotten, Stockholm (46) 8-440-5928; sean_cotten@standardandpoors.com
Nicolas Hengstebeck, Frankfurt (49) 69-33-999-167; Nicolas_Hengstebeck@standardandpoors.com
FRANKFURT (Standard & Poor's) July 3, 2012--Standard & Poor's Ratings Services
said today it had revised its outlook on eight Swiss cantonal banks and one
retail bank to negative from stable. The banks are:
• Aargauische Kantonalbank,
• Basellandschaftliche Kantonalbank,
• Basler Kantonalbank,
• Banque Cantonale Vaudoise,
• Graubuendner Kantonalbank,
• Luzerner Kantonalbank,
• Schwyzer Kantonalbank,
• Zuercher Kantonalbank, and
• Migros Bank.
The ratings on all nine banks were affirmed.
At the same time, we affirmed our ratings on the five other Swiss banks we
rate (see Ratings List).
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Outlook On Nine Swiss Banks To Negative On Exposure To Rising Property Prices; Ratings On All Swiss Banks
Affirmed
The outlook revisions stem from our view that the residential real estate
price increases we have observed in Switzerland over the past three years
represent a risk for those Swiss banks that have mainly domestic operations.
If this trend continues, the growing economic imbalance may lead us to a more
negative view of the economic environment in which Swiss banks operate and to
lower our ratings by one notch.
Home prices have been rising in Switzerland, albeit not as quickly as in some
European countries before the onset of the 2008 financial market crisis. We
also note several "hot spots", where real estate price increases exceed the
Swiss average, including the Zurich region, Lake Geneva, and areas of southern
Switzerland. We believe the upward momentum will continue in 2012, but likely
at a slower pace over the medium term.
We consider the risk of a sharp correction in property prices to be low in the
short term, given the robust demand for housing in Switzerland. This is in
light of immigration-led population growth relative to a limited supply of
housing units and the country's relatively sound economic outlook. We also
think the conservative risk and lending culture of many Swiss lending
institutions mitigates the risk of a property price bubble.
Nevertheless, given that domestic-oriented Swiss banks have significant
residential real estate loan exposures, the possibility of a continued
increase in house prices is likely to lead to increased risks of a correction
and higher loan losses for Swiss banks. The house price increases, although in
our view moderate, would not be compatible with our current assessment of
"very low risk" of "economic imbalances" under our Banking Industry Country
Risk Assessment (BICRA) criteria. We could therefore change our assessment to
"low risk" and, in turn, revise the anchor for Swiss banks downward by one
notch.
The effect of such a change on individual bank ratings will depend on a review
of the factors leading to our assessment of individual banks' stand-alone
credit profiles, given any change in the anchor. This could, for example,
result from a change in our assessment of capital adequacy within our
risk-adjusted capital framework. We use the BICRA economic risk score to
calibrate the risk weights used in our calculation of capital in several asset
classes. Conversely, we could assess certain banks as having better risk
positions because of comparatively more conservative underwriting standards
and the ability to build up additional loan loss provisions to withstand the
effects of a potential house price correction.
We are affirming the ratings and have not revised the outlook on five further
Swiss banks for the following reasons:
• UBS and Credit Suisse. The affirmation of our ratings on UBS AG and
Credit Suisse Group AG reflect that our anchor for these banks is already
one notch lower than that for domestic Swiss banks, reflecting their
global presence.
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Outlook On Nine Swiss Banks To Negative On Exposure To Rising Property Prices; Ratings On All Swiss Banks
Affirmed
• Bank Vontobel. Our ratings on Vontobel Holding AG and Bank Vontobel AG
could be affected by a change in the anchor, but the bank's sensitivity
to imbalances in the Swiss housing market is, in our view, low.
• Safra Group. The stable outlooks on pan-European J. Safra Holding AG and
Banque Safra-Luxembourg S.A. reflect our view that the group's
acquisition of Bank Sarasin might have sufficient positive implications
to offset downside pressure from a possible revision of the BICRA on
Switzerland.
• Banque Cantonale De Geneve. The stable outlook on Banque Cantonale de
Geneve reflects the bank's blended economic risk from operating in
Europe, which results in an anchor that is already one notch lower than
the current anchor for Swiss banks.
We will publish individual research updates on the nine banks with revised
outlooks, including a list of our ratings on affiliated entities and debt
issues.
Once we have more information on the development of house prices in
Switzerland during the first six months of this year, we will review the
likely implications for Swiss banks. We might revise the outlook on the nine
banks to stable if after analyzing such information we believe the trend in
house prices to have a minor effect on our BICRA on Switzerland.
RELATED CRITERIA AND RESEARCH
• Banks: Rating Methodology And Assumptions, Nov. 9, 2011
• Group Rating Methodology And Assumptions, Nov. 9, 2011
• Banking Industry Country Risk Assessment Methodology And Assumptions,
Nov. 9, 2011
• Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011
• Rating Government-Related Entities: Methodology And Assumptions, Dec. 9,
2010
• Bank Capital Methodology And Assumptions, Dec. 6, 2010
• Use Of CreditWatch And Outlooks, Sept. 14, 2009
RATINGS LIST
Ratings Affirmed; CreditWatch/Outlook Action
To From
Aargauische Kantonalbank
Basellandschaftliche Kantonalbank
Schwyzer Kantonalbank
Zuercher Kantonalbank
Counterparty Credit Ratings AAA/Negative/A-1+ AAA/Stable/A-1+
Banque Cantonale Vaudoise
Counterparty Credit Ratings AA/Negative/A-1+ AA/Stable/A-1+
Basler Kantonalbank
Graubuendner Kantonalbank
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Outlook On Nine Swiss Banks To Negative On Exposure To Rising Property Prices; Ratings On All Swiss Banks
Affirmed
Luzerner Kantonalbank
Counterparty Credit Ratings AA+/Negative/A-1+ AA+/Stable/A-1+
Migros Bank
Counterparty Credit Ratings A/Negative/A-1 A/Stable/A-1
Ratings Affirmed
UBS AG
Counterparty Credit Rating A/Negative/A-1
Credit Suisse Group AG
Counterparty Credit Rating A/Negative/A-1
Vontobel Holding AG
Counterparty Credit Rating A/Negative/A-1
Bank Vontobel AG
Counterparty Credit Rating A+/Negative/A-1
J. Safra Holding AG
Counterparty Credit Rating BBB+/Stable/A-2
Banque Safra-Luxembourg S.A.
Counterparty Credit Rating A-/Stable/A-2
Banque Cantonale de Geneve
Counterparty Credit Rating A+/Stable/A-1
NB: This list does not include all the ratings affected.
Additional Contact:
Financial Institutions Ratings Europe; FIG_Europe@standardandpoors.com
Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left
column. Alternatively, call one of the following Standard & Poor's numbers:
Client Support Europe (44) 20-7176-7176; London Press Office (44)
20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm
(46) 8-440-5914; or Moscow 7 (495) 783-4009.
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