Fitch Rates Credit Suisse Group AG's Tier 1 Capital Notes 'BB+(EXP)'

Mon Aug 19, 2013 12:31am EDT

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(The following statement was released by the rating agency) MILAN/LONDON, August 18 (Fitch) Fitch Ratings has assigned Credit Suisse Group AG's (A/Stable/F1/a) potential issue of Tier 1 capital notes an expected rating of 'BB+(EXP)'. KEY RATING DRIVERS The Tier 1 capital notes are perpetual but callable at the issuer's discretion after five years, subject to regulatory approval. Coupon payment is fully discretionary and will be prohibited if the bank has insufficient distributable profits or if such payment would result in a breach of regulatory capital requirements. The notes are subject to full and permanent write-down if the bank has been declared non-viable by the regulator or if it has received state aid to avoid a default. The notes will also be fully and permanently written down if the sum of Credit Suisse Group AG's consolidated Basel III common equity Tier 1 capital (CET1) ratio and its higher-trigger contingent capital instrument to risk-weighted assets ratio falls below 5.125%. The notes are structured to qualify as additional Tier 1 instruments under Basel III and as progressive component capital ("low-trigger" contingent capital instruments) under Switzerland's capital requirement framework for the country's largest banks. The notes are rated five notches below Credit Suisse Group AG's Viability Rating (VR) in accordance with Fitch's criteria for "Assessing and Rating Bank Subordinated and Hybrid Securities" (dated 5 December 2012). The notching reflects the notes' loss severity and incremental non-performance risk. Fitch has applied two notches for loss severity given the notes' full and permanent write-down feature. Fitch has applied three notches for incremental non-performance risk to reflect the instruments' fully discretionary coupon payment, which Fitch considers the most easily activated form of loss absorption. Credit Suisse Group AG reported a 15.3% Basel III CET1 ratio on 30 June 2013 based on capital and risk-weighted asset regulations in place at the time. Its 'look-through' CET1 ratio based on Basel III regulations as of 2019 at the same date was 9.3%. Fitch expects to assign 50% equity credit to the notes to reflect their perpetual nature, their level of subordination and the fully-discretionary coupon payment. RATING SENSITIVITIES As the notes are notched from Credit Suisse Group AG's VR, their rating is primarily sensitive to any change in this rating, which itself is currently in line with Credit Suisse AG's VR, in line with Fitch's 'Rating FI Subsidiaries and Holding Companies' criteria (10 August 2012). The notes' rating is also sensitive to any change in notching that could arise if Fitch changed its assessment of the probability of the notes' non-performance risk relative to the risk captured in Credit Suisse Group AG's VR. This might reflect a change in capital management or an unexpected shift in regulatory buffers, for example. Contact: Primary Analyst Christian Scarafia Senior Director +39 02 87 90 87 212 Fitch Italia S.p.A. V.lo S. Maria alla Porta 1 20123 Milan Secondary Analyst Christian Kuendig Senior Director +44 20 3530 1399 Committee Chairperson Gordon Scott Managing Director +44 20 3530 1075 Applicable criteria, "Assessing and Rating Bank Subordinated and Hybrid Securities", dated 5 December 2012, and "Global Financial Institutions Rating Criteria," dated 15 August 2012, are available at www.fitchratings.com. Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria and Related Research: Assessing and Rating Bank Subordinated and Hybrid Securities here Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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