In a noteworthy move, credit rating agency Moody’s has downgraded the credit ratings of Vontobel Holding and its banking subsidiary, citing a lukewarm revival in its asset management business. This shift came to light in a report released on Monday, reflecting challenges that may have significant implications for the group’s financial positioning.
Moody’s has lowered the long-term issuer ratings for both Vontobel Holding and Bank Vontobel from A2 to A3. Accompanying this downgrade, the agency revised the outlook from negative to stable. Furthermore, the rating for Vontobel Holding’s non-cumulative preferred shares also took a hit, dropping from Baa2 to Baa3. On a more positive note, the bank managed to retain its long-term and short-term deposit ratings of Aa3/P-1, as well as its long-term and short-term Counterparty Risk Ratings (CRR) of A2/P-1, although the outlook for the long-term deposit ratings moved from “developing” to “stable.”
Moreover, the Baseline Credit Assessment (BCA) and Adjusted BCA of Bank Vontobel have been revised down to A3 from A2. However, its long-term and short-term Counterparty Risk Assessment remains unscathed at A1(cr)/P-1(cr).
The primary driver for the downgrade is the “limited measurable success” in revitalizing Vontobel Holding’s asset management division. This stagnation has negatively influenced the group’s overall franchise strength and the intimate integration of its banking operations. Moody’s emphasized that the risk profile of the group’s businesses—especially outside the asset management sector—has become an essential consideration for assessing the bank’s credit robustness.
Despite these hurdles, the BCA acknowledges the solid capital buffers and low lending risks that both the bank and the group possess. Their strong liquidity reserves and proven track record in wealth management and structured product issuance remain bright spots. However, a lingering concern is the group’s reliance on uninsured retail deposits, which poses operational, reputational, and market risks.
Ultimately, the stable outlook for the issuer ratings signals a cautious optimism, suggesting that Bank Vontobel’s credit profile remains securely anchored at the BCA level of A3. But in the fast-moving world of finance, one must wonder: will Vontobel soon win a championship for comeback stories, or will it keep us on the edge of our seats?
What prompted Moody’s to downgrade Vontobel’s credit ratings?
Moody’s downgraded Vontobel’s credit ratings due to the limited success in revitalizing its asset management business, which negatively impacted the overall franchise strength.
How has Vontobel maintained some stability in its ratings?
Despite the downgrade, Vontobel has retained strong capital buffers, low lending risks, and a solid liquidity position, which contributed to the stable outlook on its ratings.
What challenges does Vontobel face moving forward?
Vontobel faces challenges related to operational, reputational, and market risks, primarily stemming from a business model heavily reliant on uninsured retail deposits.
