Moody’s downgrades Credit Suisse

Moody's Investors Service said it downgraded the long-term ratings of Credit Suisse AG and affiliates, including the bank's long-term deposit rating to A1 from Aa3, senior unsecured debt rating to A2 from A1, standalone baseline credit assessment (BCA) to baa2 from baa1, counterparty risk assessment to A1(cr) from Aa3(cr) and the rating on the senior unsecured debt of Credit Suisse Group Funding (Guernsey) Ltd. guaranteed by the bank's parent holding company, Credit Suisse Group AG, to Baa3 from Baa2.

The bank's short-term ratings and short-term counterparty risk assessment of Prime-1 and Prime-1(cr), respectively, were affirmed.

The action concludes a review for downgrade that began on Oct. 21 following Credit Suisse's announcement of its new strategic plan.

The outlook is stable.

Moody’s said the action reflects its expectation that Credit Suisse's profitability will remain weak over the next two years at a level that is not consistent with its previous ratings.

Based on the agency’s adjustments, the rating agency expects the bank's return on tangible assets will likely average 0.4% over the next two years, unchanged from the first nine months of 2015. Profit challenges will stem from restructuring charges, costs from the wind-down or exit of businesses no longer considered strategic, and the costs of incremental investments for growth.

Moody’s agency expects that these added costs are likely to be only partially offset over the next two years by the realization of cost savings from the bank's re-engineering initiatives and business exits along with higher revenues from the bank's growth initiatives.

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