Zürcher Kantonalbank (ZKB) has reaffirmed its credit rating for UBS Group at BBB+, which is lower than the ratings given by major international rating agencies.
ZKB's closer scrutiny of UBS's capital distribution and the associated migration risks following its acquisition of Credit Suisse (CS) is the reason for this divergence in ratings.
The recent quarterly results from UBS have prompted ZKB's credit research team to take a more cautious approach due to the high integration risks that persist.
The Common Equity Tier 1 (CET1) ratio, reported at 14.3 percent, fell short of expectations. The uncertainty surrounding future capital requirements is a significant concern for UBS, and the bank's commitment to its distribution targets is heavily contingent on these yet-to-be-determined capital requirements.
The integration of Credit Suisse into UBS has been a focal point, and the risks associated with this transition cannot be overlooked. ZKB's decision to downgrade UBS from A- to BBB+ during the CS transaction in spring 2023 highlights the bank's vigilant approach to credit ratings.
As UBS navigates the complexities of integrating Credit Suisse and adapting to potential regulatory changes, the question of capital requirements will remain a pivotal issue. ZKB's cautious stance serves as a reminder of the challenges that lie ahead for UBS.