Scope Ratings has today changed to Positive from Stable the outlook on various ratings related to UBS AG: the A+ Issuer Credit Strength Rating (ICSR), the A+ rating on senior unsecured debt not eligible for TLAC, the A rating on senior unsecured debt eligible for TLAC (issued by UBS Group AG), the BBB+ rating on Tier 2 securities, the BBB- rating on AT1 securities (issued by UBS Group AG), and the S-1 short-term rating.

According to Scope, the group has recovered well from the financial crisis. UBS is ahead of many global peers in successfully reshaping its business model and now has a mix of activities which are well adapted to a changed operating environment. The strategy remains centred on its leading wealth management businesses and its position as a leading universal bank in Switzerland. Asset management and investment banking are also important and integral parts of the group’s offering. These businesses are considered “capital efficient” and offer attractive growth and profit opportunities.

The rating agency further noted that UBS has materially reduced the size of its balance sheet as well as improved its quality. Average 1Q 2016 high quality liquid assets, primarily cash and balances with central banks amounted to CHF 216bn or over 20% of total assets. Meanwhile, the group’s fully applied CET1 and Tier 1 leverage ratios were 14% and 5.4%, respectively, as of end-March 2016. UBS views its balance sheet strength as a key competitive advantage which provides clients and stakeholders with comfort. Scope considers that the group is well-positioned to meet the latest Swiss too-big-to-fail requirements which are being phased-in from 1 July 2016 and must be met by end-2019.

Scope concluded that it expects UBS to generate solid earnings despite the generally weak macroeconomic environment and ongoing volatile markets. The wealth management industry continues to face challenges, including tax treaties and agreements for the automatic exchange of tax information which may impact client flows and operating margins. Sustained improvements in cost levels and efficiency would be a positive rating change driver.

The following rating actions were taken:

• UBS AG: Issuer credit-strength rating (ICSR) of A+, outlook changed to Positive from Stable.
• UBS AG: Senior unsecured debt ratings (not eligible for TLAC) of A+, outlook changed to Positive from Stable.
• UBS Group AG: Senior unsecured debt ratings (eligible for TLAC) of A, outlook changed to Positive from Stable.
• UBS AG: Tier 2 ratings of BBB+, outlook changed to Positive from Stable.
• UBS Group AG: AT1 ratings of BBB-, outlook changed to Positive from Stable.
• UBS AG: Short-term debt rating of S-1, outlook changed to Positive from Stable.

Regulatory disclosures

Information pursuant to Regulation (EC) No 1060/2009 on credit rating agencies, as amended by Regulations (EU) No. 513/2011 and (EU) No. 462/2013

Responsibility
The party responsible for the dissemination of the financial analysis is Scope Ratings AG, Berlin, District Court for Berlin (Charlottenburg) HRB 161306 B, Executive Board: Torsten Hinrichs (CEO), Dr. Stefan Bund and Dr. Sven Janssen.
The rating analysis has been prepared by Pauline Lambert, Executive Director
Responsible for approving the ratings: Sam Theodore, Managing Director.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months. A rating change is, however, not automatically ensured.

Rating history
The full rating history can be accessed via the individual rating cards on www.scoperatings.com

Information on interests and conflicts of interest
The  ratings were prepared independently by Scope Ratings but for a fee based on a mandate of the rated entity.

As at the time of the analysis, neither Scope Ratings AG nor companies affiliated with it hold any interests in the rated entity or in companies directly or indirectly affiliated to it. Likewise, neither the rated entity nor companies directly or indirectly affiliated with it hold any interests in Scope Ratings AG or any companies affiliated to it. Neither the rating agency, the rating analysts who participated in this rating, nor any other persons who participated in the provision of the rating and/or its approval hold, either directly or indirectly, any shares in the rated entity or in third parties affiliated to it. Notwithstanding this, it is permitted for the above-mentioned persons to hold interests through shares in diversified undertakings for collective investment, including managed funds such as pension funds or life insurance companies, pursuant to EU Rating Regulation (EC) No 1060/2009. Neither Scope Ratings nor companies affiliated with it are involved in the brokering or distribution of capital investment products. In principle, there is a possibility that family relationships may exist between the personnel of Scope Ratings and that of the rated entity. However, no persons for whom a conflict of interests could exist due to family relationships or other close relationships will participate in the preparation or approval of a rating.

Key sources of information for the rating
Website of the rated entity/issuer, Annual reports/quarterly reports of the rated entity/issuer, Current performance record, Detailed information provided on request, Data provided by external data providers, Interview with the rated entity, External market reports, Press reports / other public information,
Scope Ratings considers the quality of the available information on the evaluated company to be satisfactory. Scope ensured as far as possible that the sources are reliable before drawing upon them, but did not verify each item of information specified in the sources independently.

Examination of the rating by the rated entity prior to publication
Prior to publication, the rated entity was given the opportunity to examine the rating and the rating drivers, including the principal grounds on which the credit rating or rating outlook is based. The rated entity was subsequently provided with at least one full working day, to point out any factual errors, or to appeal the rating decision and deliver additional material information. Following that examination, the rating was not modified.

Methodology
The methodologies applicable for this rating “Bank Rating Methodology” (May 2016) & “Bank Capital Instruments Rating Methodology” (May 2016) are available on www.scoperatings.com. The historical default rates of Scope Ratings can be viewed on the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s credit rating, definitions of rating symbols and further information on the analysis components of a rating can be found in the documents on methodologies on the rating agency’s website.

Conditions of use / exclusion of liability
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