Rating Rationale
March 29, 2023 | Mumbai
Credit Suisse AG
Rating reaffirmed at 'CRISIL A1+'
 
Rating Action
Rs.2000 Crore Certificate of DepositsCRISIL A1+ (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL A1+' rating on the certificates of deposit programme of Credit Suisse AG, Mumbai Branch (Credit Suisse Bank).

 

On March 20, 2023, S&P Global Ratings (S&P) has placed its long-term and short-term issuer credit rating on Credit Suisse AG of ‘A-/A-2’ on credit watch positive from ‘A-/Stable/A-2’. The rating action is driven by S&P’s view, that Credit Suisse AG's acquisition by the stronger UBS Group AG (UBS) could help to stabilise its franchise and its funding and liquidity, while strengthening its governance and risk management standards.

 

Credit Suisse AG announced on March 19, 2023, its merger agreement with UBS and that UBS will be the surviving entity upon closing of the merger transaction. As per the terms of the deal, UBS will acquire the Credit Suisse AG group for CHF 3 billion. Until consummation of the merger, Credit Suisse AG will continue to conduct its business in the ordinary course and implement its restructuring measures in collaboration with UBS.

 

Credit Suisse Bank commenced operations from February 15, 2011 with an initial capital infusion of Rs 1,135 crore from the head office. As on December 31, 2022, advances and deposits stood at Rs 567 crore and Rs 1,946 crore respectively. For the first nine months ended December 31, 2022, Credit Suisse Bank reported PAT of 170 crore on a total income (net of interest expenses) of Rs 375 crore. It had excess-statutory liquidity ratio (SLR) investments of Rs 4,658 crore (94.5% of net demand and time liabilities) as on March 10, 2023.

 

The ratings on the certificates of deposit programme of Credit Suisse Bank, the Indian operations arm of Credit Suisse AG, continues to be centrally based on S&P Global Ratings’ counterparty ratings of ‘A-/Watch Positive/A-2’ on Credit Suisse AG.

Analytical Approach

The rating on the certificate of deposit programme of Credit Suisse Bank continues to be based on S&P Global Ratings' counterparty ratings of A-/watch positive/A-2’ on Credit Suisse AG

Key Rating Drivers & Detailed Description

Strengths:

* Strategic importance to, and strong support from, Credit Suisse AG

The rating on Credit Suisse Bank continues to be based on the long-term issuer credit rating of 'A-/watch positive/A-2' by S&P Global Ratings on Credit Suisse AG. Credit Suisse Bank is expected to remain strategically important to, and envisaged to receive operational, financial and managerial support from, Credit Suisse AG.

 

However, amidst the reorganisation and restructuring by Credit Suisse AG in consultation with UBS, CRISIL Ratings will monitor the impact of this announcement on Credit Suisse Bank’s positioning in the UBS group structure post merger and its business and financial synergies with the merged entity, including the importance of India operations in its global business strategy. It is not envisaged that there will be any material impact on the short term credit profile at the current juncture.

 

* Comfortable capitalisation

Credit Suisse Bank’s capitalisation is comfortable, with total reported networth of Rs 4,907 crore as on December 31, 2022 (Rs 4,737 crore as on March 31, 2022). Capital adequacy ratios are comfortable as well, with tier-I and overall capital adequacy ratio of 43.26% and 46.58%, respectively, as on December 31, 2022 (55.73% and 60.02%, respectively, as on March 31, 2022). Head office had infused USD 198.9 million in Indian branch in January 2021. Furthermore, the capital profile is expected to remain supported by the head office, Credit Suisse AG.

 

Weakness

* Modest scale of lending operations, expected to scale up over medium term

Advances and deposits were Rs 567 crore and Rs 1,946 crore respectively as on December 31, 2022 (Rs 947 crore and Rs 2,833 crore as on March 31, 2022). Credit Suisse Bank had a sizeable investment book of Rs 15,722 crore as on December 31, 2022 (Rs 16,056 crore as on March 31, 2022), more than 90% of which is invested in government securities.

Liquidity : Superior

Credit Suisse Bank had excess-statutory liquidity ratio (SLR) investments of Rs 4,658 crore (94.5% of net demand and time liabilities) as on March 10, 2023. Additionally, the branch operations have support in the form of funding lines from the head office.

Rating Sensitivity factors

Downward factors

  • Sharp downgrade in the S&P’s ratings on Credit Suisse AG
  • Reduction in importance of India operations to the global entity
  • Substantial and continuous weakening of the asset quality and earnings profile

About the Bank

Credit Suisse AG is part of the Credit Suisse group with an internationally active financial services franchise. The group had consolidated assets of Swiss franc 531 billion as on December 31, 2022. Credit Suisse Bank commenced operations from February 15, 2011 with an initial capital infusion of Rs 1,135 crore from the head office followed by another Rs 640 crore in fiscal 2018 and Rs.1,450 crore in fiscal 2021.

 

As on March 31, 2022, total loan portfolio was Rs 947 crore (Rs 1,270 crore as on March 31, 2021). Bulk of the assets of the Indian operations are the investments in Government Securities. For the fiscal 2022, PAT was Rs. 303 crore on a total income (net of interest expenses) of Rs 376 crore, against Rs. 330 crore and Rs. 644 crore, respectively, in fiscal 2021.

 

As on December 31, 2022, advances were Rs 567 crore. For the first nine months ended December 31, 2022, PAT was 170 crore on a total income (net of interest expenses) of Rs 375 crore.

Key Financial Indicators

As on / for the year ended

Unit

December 31, 2022

March 31, 2022

March 31, 2021

Total assets

Rs Crore

20,522

20,732

19,189

Total income

Rs Crore

938

804

8981

Profit after tax

Rs Crore

170

303

330

Gross NPA

%

0

NIL

NIL

Overall capital adequacy ratio

%

46.58

60.02

34.62

Return on assets (annualised)2

%

1.1

1.5

2.3

1Figures of the previous period / year have been re-grouped to conform to the current period presentation.

2As per CRISIL Ratings calculations

Note: All the numbers for period ending December 31, 2022 are provisional

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs Crore) Complexity level Rating Assigned with Outlook
NA Certificate of Deposits Programme NA NA 7-365 Days 2000 Simple CRISIL A1+
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Certificate of Deposits ST 2000.0 CRISIL A1+   -- 10-11-22 CRISIL A1+ 01-04-21 CRISIL A1+ 29-05-20 CRISIL A1+ CRISIL A1+
      --   -- 11-08-22 CRISIL A1+   --   -- --
      --   -- 26-05-22 CRISIL A1+   --   -- --
      --   -- 25-03-22 CRISIL A1+   --   -- --
All amounts are in Rs.Cr.

    

Criteria Details
Links to related criteria
Rating Criteria for Banks and Financial Institutions
Mapping global scale ratings onto CRISIL scale
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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