Credit Suisse's turnaround might be similar to UBS's restructuring earlier, but the plan will mean a bumpier ride for CS, especially for bondholders, says David Fanger, a Moody's Senior Vice President.
Credit Suisse's new strategic plan bears similarities to UBS's current restructuring plan that substantially reduced the latter's footprint in the capital markets and should significantly improve CS' profitability in the next two years, Moody's Investors Service says.
In the longer term, CS's efforts to reduce some of its capital markets activities and focus more on its stable wealth management business should improve its earnings stability and profitability and be credit positive.
Restructuring Charges
However, the report, «Peer Comparison: Credit Suisse and UBS» notes that UBS has nearly completed its transformation launched over four years ago, while CS is just embarking on a new and ambitious plan which goes significantly further than its previous restructurings.
«The new plan will likely mean a comparatively bumpier ride for CS bondholders over the next couple of years, while the unwinding of non-core assets will weigh on earnings,» said David Fanger, a Moody's Senior Vice President. «Restructuring charges and planned investments in the Asia Pacific and global wealth management units will also dampen profitability.»
Larger Capital Markets
The new strategy at CS has also brought its capital buffers more in line with other European global investment banking peers. The firm issued 6 billion francs in new common equity and also has other capital raising plans, which is an important protection for creditors, though they still lag behind UBS.
Moody's also says even following the full implementation of the strategic plan CS will have larger capital markets operations than UBS. CS's remaining capital markets activities are also likely to be more heavily reliant on fixed income sales and trading than many of its peers, even though the new strategy calls for a de-emphasis of macro products such as rates and currency.
