(Repeat for additional subscribers)
May 20 (The following statement was released by the rating agency)
Credit Suisse's USD2.8bn settlement with several US authorities announced last
night represents a temporary set-back in reaching its stated capital ratio target but we do not
believe it will cause significant damage to its franchise.
The guilty plea by Credit Suisse AG, the group's main banking subsidiary in
Switzerland, will not result in licence withdrawals, according to the Swiss
regulator's report published this morning. No further proceedings will be
initiated concerning licences of Credit Suisse in the US or in the UK, the
We also expect there will be no requirement to curtail existing business for any
entities of the Credit Suisse group. We believe that the settlement and guilty
plea will not result in any significant disruption of Credit Suisse's operations
as it is in the interest of authorities to avoid material damage to the
industry, including the large US banks.
There are no changes to Credit Suisse's ratings (A/Stable/a) at this stage. The
bank announced it would take actions to support its capitalisation. If the
measures, which include reducing risk-weighted assets and selling assets, are
not successful or if the damage to Credit Suisse's franchise is materially
larger than currently anticipated, we would consider reviewing the ratings, and
potentially downgrading the Viability Rating.
The settlement will have a negative impact on 2Q14 pre-tax earnings of USD1.8bn
(net of available legal provisions of USD1bn), which is in our view likely to
result in a small pre-tax loss in 2Q14. Credit Suisse's fully applied Basel III
pro-forma common equity Tier 1 (CET1) ratio at end-1Q14 would drop to 9.3% from
10.0%, which is at the lower end of its global trading and universal banks peer
group. The bank has announced it will take actions to restore its fully loaded
CET1 ratio to 10% by end-2014 and has reconfirmed its 11% end-2015 target. This
is positive as the bank does not plan to rely on internal capital generation
from operating businesses.
The Credit Suisse case is part of a broader investigation by the US authorities
into the alleged assistance certain Swiss banks provided to US persons to evade
or avoid paying tax. The Credit Suisse investigation has been ongoing since
2011; the bank had announced the exit from US resident cross-border business in
2009. According to a US Senate subcommittee report, Credit Suisse at end-2006
had up to CHF12bn assets under management from US customers with Swiss accounts.
The bank has stated that about USD5bn of this had been verified to be
Fitch views this as an example of the escalating level of fines being extracted
from banks by the US authorities, including the Department of Justice. UBS went
through a similar case to Credit Suisse's in 2009, which resulted in a fine of
USD780m. The amount Credit Suisse has to pay is higher, even though the size of
its egregious business was smaller.