Corporate Debt Restructuring Masterclass

18 July 2022 (Mon), 5pm Singapore/HK time

Credit Suisse Group AG’s was downgraded to BBB+ from A- by Fitch with a stable outlook. Fitch notes that weak operating profitability compared with peers’ highlights the execution risk and the challenges for the bank to strengthen its performance over the next 24 months as well as for its risk governance. Fitch also sees pressure on Credit Suisse’s wealth-management and investment-banking franchises if the group fails to implement its strategic plan. The rating agency expects Credit Suisse’s profitability to remain muted in 2022 after its Q1 results were weaker than its peers. Credit Suisse will have to implement its strategic plan announced last year, so the current year will be a transition year. The bank plans to book about CHF 400mn ($405mn) in restructuring charges in the year. Operating expenses could rise significantly on further provisions for legal and regulatory matters, and measures to strengthen risk governance. Fitch however expects the quality of the bank’s loan book to remain strong as the economy comes on track. With the bank aiming to limit capital allocated to the investment-banking division to 50% of the total capital allocated to the other divisions, the investment bank will invest in its advisory capabilities and will focus on securitized products, credit, and leveraged finance. Fitch added that its unconsolidated CET1 ratio improved to 11.8% as of Q1 and further dividends from subsidiaries can help it reach the target 12%. The downgrade by Fitch comes just a day after S&P cut the group’s ratings to A from A+.

Credit Suisse’s dollar bonds were trading slightly weaker, with its  7.125% Perp down over 0.09 points to 99.74 yielding 8.39%.

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