UBS Group AG (Holding Company); UBS AG (Lead Bank)

The stable outlook reflects our view of UBS' strong resilience through periods of elevated market stress because of its asset-gathering-focused business model and credit portfolio dominated by collateralized lending. We could lower the rating over the next two years if there were a severe setback in the economic prospects and asset prices that significantly weakened UBS' asset quality and earnings. While being more unlikely, we could also lower the rating if the outstanding litigation results in significant charges exceeding provisions, leading to a drop in the risk-adjusted capital (RAC) ratio to below 10%. A one-notch downward revision of the group stand-alone credit profile (SACP) to 'a-' would likely result in a one-notch downgrade of UBS Group AG but would be

... focus, and strong capitalization underpin its superior stability and its financial strength. UBS' revenue pool is dominated by stable contributions from its leading wealth and asset management divisions that generate favorable risk-adjusted returns. In addition, UBS' leading market position in Switzerland's domestic banking market has contributed to its superior business stability that partly offsets higher risks and complexity associated with its investment-banking activities. We also expect its risk-adjusted capitalization to remain strong and among the highest of its peer group, despite unresolved litigation in France and the U.S. UBS has increased its financial targets but is now facing more challenging market conditions. Its performance has been very strong over the last two years, also thanks to very benign capital markets. We now expect slightly reducing earnings reflecting more challenging market conditions and reduced asset...

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