ZURICH (Reuters) - Credit Suisse (SIX:CSGN) has received its second ratings downgrade this week, adding further pressure to the beleagured Swiss lender which has been under fire over a series of losses and scandals.
Fitch downgraded Credit Suisse's long-term issuer default rating to BBB+ from A-, pointing to execution risks as the bank tries to turn itself around following a slew of negative events that have indicated weakness in its risk and governance culture and prompted a wide-scale culling among its executive and board-level ranks.
"The downgrade reflects Fitch's view that Credit Suisse's weak operating profitability compared with peers' highlights the execution risk during the group's restructuring in a difficult market environment and indicates the challenges for the bank to strengthen its performance over the next 24 months as well as for its risk governance," Fitch Ratings said in a statement on Wednesday.
The change follows a downgrade on Tuesday by Standard & Poor's (S&P), which lowered the bank's credit rating to BBB from BBB+.
Fitch said Credit Suisse's lowered rating now had "sufficient headroom to withstand a period of weaker profitability if the group maintains its franchise", changing its outlook to stable from negative.
Failure to implement a strategic turnaround announced last year under then-Chairman Antonio Horta-Osorio, however, would "indicate weaknesses in its business model" and put pressure on its core wealth management as well as its investment banking franchise.
The downgrades further widen the gap between Credit Suisse and major rivals including UBS, which has an A- rating and stable outlook from Standard & Poor's and an A+ rating with stable outlook from Fitch.