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UBS's main unit is upgraded by Moody's on wealth business

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UBS had the credit rating for its main operations raised by Moody’s, which said the restructured investment bank and wealth-management business should help the lender weather a market downturn.

The long-term issuer and senior-unsecured debt ratings of UBS, which comprises the group’s main banking and wealth-management businesses, were raised one level to Aa3. The long-term deposit rating was upgraded by one notch to Aa2. The outlook was changed to stable. For comparison, Credit Suisse’s main operating unit — Credit Suisse — is rated A1, while Credit Suisse Group is rated at Baa2 with a stable outlook.

UBS scaled back its investment bank after the financial crisis to reduce risk and focus on its large wealth-management business, which provides more stable earnings. The lender has cut the amount of capital allocated to the investment bank, focusing on areas such as equities, foreign exchange and advisory services. The higher rating contrasts with a downgrade of German competitor Deutsche Bank, which was cut by S&P Global Ratings less than three weeks ago as it struggles to turn around its securities unit.

“UBS management actions have resulted in a less complex investment-banking operation, more aligned with its wealth and asset-management businesses and more focused on less capital-intensive and flow-based capital markets segments,” Moody’s said. The firm had put the bank’s ratings under review for a potential upgrade on April 5.

More recently, UBS merged its two wealth-management units in the Americas and the rest of the world. Analysts at JPMorgan Chase have said that UBS can do more on costs and is trailing Credit Suisse, which has shown greater momentum.

Savings from the merger of UBS’s wealth-management units could be a potential boost to profits which have not yet been factored in, while cost savings at Credit Suisse are largely reflected in estimates, they said.

Bloomberg News