Glarner Kantonalbank

The negative outlook reflects S&P Global Ratings' view that we could lower the rating on GLKB over the next 12-24 months, during which time we expect more clarity with respect to the local government's supportive stance toward the bank and planned change of the cantonal bank law. These factors will affect our assessment of the likelihood of extraordinary and ongoing local government support, which we incorporate into the rating. We could lower the rating if we concluded that the canton's ties to the bank had deteriorated in light of the ongoing discussion and if the measures under the current proposal became effective after a final vote by the people of Glarus. This would likely lead us to reduce the number

...We consider GLKB has a franchise weaker than those of peers in Switzerland and European markets with a similar industry risk profile, such as Germany, Austria, and France. This stems from its focus on expanding its loan book outside its home canton. In our view, this results in a more price-sensitive and less stable customer base. That said, the bank has demonstrated resilience during the pandemic and has felt no significant financial impact. Our ratings on GLKB include uplift for potential extraordinary government support on top of its 'a-' SACP, resulting in the '##-' long-term issuer credit rating. While we still expect GLKB to receive timely and sufficient extraordinary support from Glarus if needed, the local government's intentions to change the cantonal bank law will gradually weaken GLKB's ties to its owner, in our view. GLKB's SACP also currently incorporates significant ongoing implicit support benefits--for example lower funding costs and a sticky deposit base--which support...

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