The Zurich-based bank wants to focus more on private banking and wealth management in emerging markets while shrinking its investment bank, known locally as "doing a UBS" as it follows a similar recipe to larger rival UBS's 2012 overhaul. In a note published late on Monday after reviewing Credit Suisse's new strategy, Moody's said the bank's bottom line would likely take a short-term hit from the cost of restructuring its business and investing in growth projects.
"While the new strategic plan is intended to boost the bank's profitability over the longer term, the plan's costs make any near-term improvements less likely," Moody's wrote. Moody's downgraded Credit Suisse AG's long-term debt ratings, which included lowering the bank's senior unsecured debt rating to A2 from A1. Thiam told investors that 2016 would not be a good year for the bank when he detailed its strategy in October.
In a separate note, Moody's upgraded UBS AG's long-term ratings, including its senior unsecured debt rating to A1 from A2, in part due to the bank's progress in implementing its overhaul. "Moody's expects that with the bank's restructuring efforts largely completed, including a reduction in reliance on the more volatile investment banking business - and with the significant and continuing focus on improving risk management, risk controls, and risk culture which the bank has implemented in the past few years - the bank's earnings stability should improve," Moody's wrote.
Moody's expected Credit Suisse's return on tangible assets, a measure of profitability, to average 0.4 percent over the next two years. It forecast UBS's return on tangible assets would average 0.9 percent before tax and 0.7 percent after tax over the same period.