TEXT-S&P keeps J. Safra Holding AG 'BBB+/A-2' ratings on watch pos

Mon Nov 5, 2012 8:35am EST

Related News

(The following statement was released by the rating agency)

Nov 05 -

Overview

-- We expect to update our view of the business and financial profiles on the enlarged J. Safra Holding AG, the parent of the Safra group of private banks (J Safra), in the next 90 days. This is pending our analysis of new financial information following the acquisition of Bank Sarasin & Co Ltd. in July 2012 and the final result of the public tender offer to minority shareholders of Bank Sarasin & Co Ltd. launched in August 2012.

-- Our 'BBB+/A-2' long- and short-term ratings on J. Safra Holding AG and our 'A-/A-2' long-and short-term ratings on subsidiary Banque Safra - Luxembourg remain on CreditWatch positive.

-- The CreditWatch positive reflects our view that the enlarged J. Safra group will likely benefit from its larger size and scale, wider geographic coverage, and especially, increased competitiveness in tax-compliant assets.

Rating Action

On Nov. 5, 2012, Standard & Poor's Ratings Services said it was keeping its 'BBB+/A-2' long- and short-term counterparty credit ratings on Switzerland-based J. Safra Holding AG, the parent company of the Safra group of private banks (J. Safra), and its 'A-/A-2' long- and short-term counterparty credit ratings on its subsidiary Banque Safra - Luxembourg on CreditWatch with positive implications, where it placed them on Aug. 1, 2012.

Rationale

The CreditWatch positive placements reflect our positive view of the Safra family's purchase of Switzerland-based Bank Sarasin & Co Ltd. (Bank Sarasin, not rated) in July 2012. Bank Sarasin will be consolidated under J. Safra Holding AG. Further to the settlement of the public offer for the B shares of Bank Sarasin on Oct. 19, 2012, after which J. Safra held shares representing 99.09% of Bank Sarasin's capital and 99.47% of its voting rights, J. Safra announced that it has applied for the cancellation of the remaining publicly held shares of Bank Sarasin.

Based on currently available public information, we believe that Bank Sarasin's business franchise, in particular in tax-compliant assets, makes it an appealing partner that will allow J. Safra to strengthen its franchises with little overlap in the overall international footprint. The enlarged J. Safra will have around CHF130 billion in assets under management (AuM) and broader international diversification. It will also benefit from additional distribution channels for its products and access to new growth markets, especially in Asia and the Middle East.

Bank Sarasin is a specialized onshore wealth manager, catering for institutional and private clients, with investment banking operations that are marginal compared with its domestic and international peers'. With CHF19.3 billion in total balance sheet assets and CHF99.1 billion in AuM as of June 30, 2012, Bank Sarasin is a midsize player in the Swiss banking market. The bank has a sound and seasoned private banking franchise, in our opinion, with wide geographic diversification of income sources. Bank Sarasin's Tier 1 capital ratio stood at 15.5% on June 30, 2012, which is above the minimum regulatory requirement of 8% and in line with J. Safra Holding's AG's standards.

CreditWatch

We expect to update the market about the CreditWatch placement and our view of the business and financial profile of the enlarged J. Safra within the next 90 days, pending the analysis of new financial information after the final result of the tender offer to minority shareholders. To update or resolve the CreditWatch, we will estimate our risk-adjusted capital (RAC) ratio for the enlarged J. Safra and monitor the progress and size of the Safra family's announced capital injection. We will also assess the systemic importance of the enlarged J. Safra in Switzerland, which we view as "supportive" to its banking industry.

We would consider a positive rating action if we saw noticeable strengthening in J. Safra's risk position through an enlarged customer base, a more diversified securities portfolio, significant tax-compliant assets, and the unlocking of synergies with Bank Sarasin.

We might also revise our opinion of the systemic importance of J. Safra Holding AG in Switzerland to "moderate" from "low," following the consolidation of Bank Sarasin. If we made this change, we would factor into the ratings on J. Safra Holding AG one notch of government support above the stand-alone credit profile (SACP).

We might affirm the ratings depending on the impact on the enlarged group of developments in the Swiss residential housing market. It could face some pressure in Switzerland because of ongoing extraordinary increases in domestic house prices. (see "Outlook On Nine Swiss Banks To Negative On Loan Exposure To Rising Property Prices; Ratings On All Swiss Banks Affirmed," published July 3, 2012).

Ratings Score Snapshot

Issuer Credit Rating A-/Watch Pos/A-2

Bank Holding Company Rating BBB+/Watch Pos/A-2

SACP a-

Anchor a

Business Position Moderate (-1)

Capital and Earnings Strong (+1)

Risk Position Moderate (-1)

Funding and Liquidity Average and Adequate (0)

Support 0

GRE Support 0

Group Support 0

Sovereign Support 0

Additional Factors 0

Related Criteria And Research

-- J. Safra Holding AG 'BBB+/A-2' Ratings Placed On CreditWatch Positive Following Closing Of Bank Sarasin Acquisition, August 1, 2012

-- J. Safra Holding AG 'BBB+' Ratings Affirmed Despite Concerns About Swiss Housing Market; Outlook Stable, July 3, 2012

-- Outlook On Nine Swiss Banks To Negative On Loan Exposure To Rising Property Prices; Ratings On All Swiss Banks Affirmed, July 3, 2012

-- Switzerland-Based J. Safra Holding AG And Operating Subsidiary Ratings Lowered On Bank Criteria Change; Outlook Stable, Dec. 5, 2011

-- J. Safra Holding AG Assigned 'A-/A-2' Ratings And Subsidiary Banque Safra-Luxembourg Rated 'A/A-1'; Outlooks Negative, June 9, 2011

-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011

-- Group Rating Methodology And Assumptions, Nov. 9, 2011

-- Use Of CreditWatch And Outlooks, Sept. 14, 2009

Ratings List

J. Safra Holding AG

Counterparty Credit Rating BBB+/Watch Pos/A-2

Banque Safra - Luxembourg

Counterparty Credit Rating A-/Watch Pos/A-2

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