1 Innovative Solutions. Immaculate Service. This information is for professional investors only and should not be presented to, or relied upon by, private investors. We produce a Quarterly Investment Bank Credit Report as part of our continual counterparty due diligence process. The Report includes summaries of the quarterly movements, for most of the main counterparties in the structured product issuance space, of their: ▪ Share Prices ▪ Credit Default Swap Rates ▪ Credit Ratings Investment Bank Credit Report | Q2 2017
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1
Innovative Solutions. Immaculate Service.
This information is for professional investors only and should not be presented to, or relied upon by, private investors.
We produce a Quarterly Investment Bank Credit Report as part of our continual counterparty due diligence process.
The Report includes summaries of the quarterly movements, for most of the main counterparties in the structured product issuance space, of their:
Banco Bilbao Vizcaya Argentaria 8 JPMorgan Chase & Co 23
Banco Santander S.A. 9 Lloyds Banking Group plc 24
Bank of America Corporation 10 Macquarie Bank Ltd 25
Barclays Bank plc 11 Morgan Stanley 26
BNP Paribas 12 Natixis 27
Citigroup Inc. 13 Nomura Bank International plc 28
Commerzbank AG 14 NORTHERN TRUST CORP 29
Credit Agricole S.A. 15 Rabobank 30
Credit Suisse AG 16 Royal Bank of Canada 31
Danske Bank A/S 17 Santander UK plc 32
Deutsche Bank AG 18 Société Générale 33
Goldman Sachs International 19 Standard Chartered plc 34
HSBC Holdings plc 20 The Royal Bank of Scotland plc 35
ING Groep N.V. 21 UBS AG 36
Investec Bank plc 22 UniCredit Group 37
Important Information 38
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Rating agency scales
Standard & Poor’s Investment Grade AAA Extremely strong capacity to meet financial commitments. Highest Rating.
AA+, AA, AA- Very strong capacity to meet financial commitments.
A+, A, A- Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
BBB+, BBB, BBB- Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
Non-Investment Grade BB+, BB, BB- Less vulnerable in the near-term but faces major on-going uncertainties to adverse business, financial and economic conditions.
B+, B, B- More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
CCC+, CCC, CCC- Currently vulnerable and dependent on favourable business, financial and economic conditions to meet financial commitments.
CC Currently highly vulnerable.
C Currently highly vulnerable obligations and other defined circumstances.
CI Past due on interest
R Under regulatory supervision due to its financial situation
SD Has selectively defaulted on some obligations
D Payment default on financial commitments.
Fitch Investment Grade AAA Exceptionally strong capacity for payment of financial commitments. Highly unlikely to be adversely affected by foreseeable events.
AA+, AA, AA- Very strong capacity for payment of financial commitments. Not significantly vulnerable to foreseeable events.
A+, A, A- Strong capacity for payment of financial commitments, but may be more vulnerable to adverse business or economic conditions.
BBB+, BBB, BBB-Adequate capacity for payment of financial commitments, but adverse business or economic conditions are more likely to impair this capacity.
Non-Investment Grade BB+, BB, BB- Elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions. But business or financial
flexibility exists which supports the servicing of financial commitments.
B+, B, B-Financial commitments currently being met. Capacity for continued payment vulnerable to deterioration in business and economic environment.
CCC+, CCC, CCC- Substantial credit risk. Default is a real possibility.
CC Very high levels of credit risk. Default of some kind appears probable.
C Exceptionally high levels of credit risk. Default is imminent or inevitable, or the issuer is in standstill.
D Has defaulted on obligations and Fitch believes that it will generally default on most or all obligations
Moody’s Investment Grade Aaa Judged to be of the highest quality, with minimal credit risk.
Aa1, Aa2, Aa3 Judged to be of high quality and are subject to very low credit risk.
A1, A2, A3 Considered upper-medium grade and are subject to low credit risk.
Baa1, Baa2, Baa3 Subject to moderate credit risk. They are considered medium grade and as such may possess certain speculative characteristics.
Non-Investment Grade Ba1, Ba2, Ba3 Judged to be of the highest quality, with minimal credit risk.
B1, B2, B3 Judged to be of high quality and are subject to very low credit risk.
Caa1, Caa2, Caa3 Judged to be of poor standing and are subject to very high credit risk.
Ca Highly speculative and are likely in, or very near, default, but with some prospect of recovery of principal and interest.
C Lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.
SpecialWR Withdrawn Rating
P Provisional
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■ Historically credit ratings have been used as the principal measure of the financial strength of an underlying issuer. However, over recent years Credit Default Swap (‘CDS’) rates have become an additional measure of the financial security of a company and are now often utilised alongside ratings produced by credit rating agencies.
■ CDS rate levels are determined by the supply and demand of market participants and therefore do not rely on one single agency todetermine a company’s credit worthiness.
■ A CDS is basically an insurance contract - the buyer makes periodic payments to the seller and would receive a pay off in the event of failure in the underlying financial instrument/institution, effectively insuring against a debt default.
■ CDS spreads allow investors to analyse how risky an institution’s debt is perceived to be by the market, a relevant factor when considering the credit strength of a counterparty.
■ The CDS rates on the next page detail the % above London Interbank Offered Rate (‘LIBOR’) that buyers are willing to pay a seller in order to insure themselves against the likelihood of a credit default event of the underlying issuer.
■ Companies with higher CDS spreads are considered riskier by the market, as they are considered more likely to default than those with a lower CDS spread, all other things being equal.
■ Capital ratios are another measure of a bank's strength. These are used by regulatory authorities, with the most widely known being tier one capital ratio, which consists largely of shareholders' equity. It is the amount paid originally to purchase permanent capital (such as ordinary shares) of the bank and retained earnings (minus losses). It is the core measure of a bank's financial strength from a regulator's point of view. This ratio has been the subject of much review over recent years resulting in the Basel III Accord, requiring banks to maintain a minimum tier one capital ratio of 6%.
Credit default swaps
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The banks referred to in this report include those that we currently have, or have previously had counterparty arrangements with, as well as, other banks that have or have had a presence in the structured products market. A rating outlook assesses the potential direction of a long-term credit rating over the intermediate term.
▪ Please note that not every bank listed has a rating from each of the three ratings agencies.
▪ * indicates that the credit rating agency has that company on watch. *+ indicates a possible upgrade, and *- a possible downgrade.
▪As of 10 June 2017, Moody’s ceased to display their “Long Term Rating” for banks. Not all banks listed above have been given an “Issuer Rating”.
Bloomberg/Meteor Research Department 27 July 2017
Credit rating overview
End of Q2
BANKLong Term Local Currency
Issuer Credit RatingOutlook Issuer Rating Outlook
Long Term Issuer Default
RatingOutlook
BANCO BILBAO VIZCAYA ARGENTA BBB+ POS Baa1 STABLE A- STABLE
BANCO SANTANDER SA A- STABLE A3 STABLE A- STABLE
BANK OF AMERICA CORP BBB+ STABLE Baa1 POS A STABLE
BARCLAYS BANK PLC A- NEG A1 NEG A STABLE
BNP PARIBAS A STABLE A1 STABLE A+ STABLE
CITIGROUP INC BBB+ STABLE - - A STABLE
COMMERZBANK AG A- NEG Baa1 STABLE BBB+ STABLE
CREDIT AGRICOLE SA A STABLE A1 STABLE A+ STABLE
CREDIT SUISSE AG A STABLE A1 STABLE A STABLE
DANSKE BANK A/S A STABLE A2 POS A STABLE
DEUTSCHE BANK AG-REGISTERED A- NEG Baa2 STABLE A- NEG
GOLDMAN SACHS INTERNATIONAL A+ STABLE A1 STABLE A STABLE
COOPERATIEVE RABOBANK UA A+ STABLE Aa2 NEG AA- STABLE
ROYAL BANK OF CANADA AA- NEG A1 NEG AA NEG
SANTANDER UK PLC A NEG Aa3 NEG A STABLE
SOCIETE GENERALE SA A STABLE - - A STABLE
STANDARD CHARTERED PLC BBB+ STABLE - - A+ STABLE
ROYAL BANK OF SCOTLAND PLC/T BBB+ STABLE - - BBB+ STABLE
UBS AG-REG A+ STABLE A1 STABLE A+ STABLE
UNICREDIT SPA BBB- STABLE - - BBB STABLE
Standard & Poor's Moody's Fitch
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This summary page is not designed to be exhaustive of all changes in the past quarter. Check the rating agency websites and relevant financial institutional resources to ensure you have the latest information
Summary of changes Bloomberg/Meteor Research Department 27 July 2017
“On June 9, 2017, S&P Global Ratings revised its outlook on Spain-based Banco Santander S.A. to stable from positive and affirmed its 'A-/A-2' long- and short-term counterparty credit ratings on the bank.”
Source: “Outlook On Spain-Based Banco Santander S.A. Revised To Stable From Positive On Acquisition Of Banco Popular Espanol”http://www.santander.com
“Fitch Ratings-Milan/London-27 April 2017: Fitch Ratings has downgraded the Long-Term Issuer Default Ratings (IDRs) of UniCredit S.p.A., Intesa Sanpaolo S.p.A. (IntesaSP), CreditoEmiliano (Credem) and Mediobanca S.p.A. to 'BBB' from 'BBB+'. Fitch revised the Outlooks on all the banks to Stable from Negative, in line with Italy's rating Outlook.”
Source: “Fitch Downgrades 5 Italian Banks' Following Sovereign Downgrade”https://www.unicreditgroup.eu/content/dam/unicreditgroup-eu/documents/en/investors/funding-and-ratings/rating/2017-04-27-Fitch-Press-Release.pdf
The following pages summarise the main credit indicators for the individual banks that we cover. This includes share price changes in the last quarter, CDS level changes in the last quarter and any credit rating revisions in the last quarter.
We plot a bank’s share price against their 5 year CDS on senior debt in the relevant local currency where possible. For reference, we also include the Markit iTraxx Europe Senior Generic Financial 5Y CDS Index as a benchmark for European CDS rates. This is based on 25 equally weighted CDS rates on investment grade European entities. The list below shows the constituents as at 27 July 2017.
We also plot bar charts, where possible, of the CDS rates from the last 2 quarters for comparison and include the 1, 3, 5 and 10 year tenor curves.
Bloomberg/Meteor Research Department 27 July 2017
Individual bank summaries
Aegon NV Banco Bilbao Vizcaya Argentari Cooperatieve Rabobank UA Hannover Rueck SE Mediobanca SpA Swiss Reinsurance Co Ltd
Allianz SE Banco Santander SA Credit Agricole SA HSBC Bank PLC Muenchener Rueckversicherungs- Royal Bank of Scotland PLC/The
Assicurazioni Generali SpA Barclays Bank PLC Credit Suisse Group AG ING Bank NV Prudential PLC UBS AG
Aviva PLC BNP Paribas SA Danske Bank A/S Intesa Sanpaolo SpA Societe Generale SA UniCredit SpA
AXA SA Commerzbank AG Deutsche Bank AG Lloyds Bank PLC Standard Chartered Bank Zurich Insurance Co Ltd
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BBVA
0
50
100
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400
450
500
0
2
4
6
8
10
12
Jun
20
12
Dec
20
12
Jun
20
13
Dec
20
13
Jun
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14
Dec
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14
Jun
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15
Dec
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Dec
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16
Jun
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17
CD
S L
evel
Sh
are
Pri
ce
Banco Bilbao Vizcaya Argentaria 5Y CDS CDS Benchmark
1Y
CD
S, 3
3.3
6
1Y
CD
S, 1
4.8
05
3Y
CD
S, 7
4.5
2
3Y
CD
S, 4
0.4
85
5Y
CD
S, 1
14
.99
5
5Y
CD
S, 6
3.3
05
10
Y C
DS
, 1
59
.35
10
Y C
DS
, 9
6.6
95
0
20
40
60
80
100
120
140
160
180
Q1 2017 Q2 2017
CD
S L
evel (b
ps)
Share Pr ice
End of Q1 7.27
End of Q2 7.265
Change on Quarter (%) -0.07%
Bloomberg Ticker: bbva sm equity
Credit Default Swap (5Y)
End of Q1 114.995
End of Q2 63.305
Change on Quarter (%) -44.95%
Bloomberg Ticker: BBVA CDS EUR SR 5Y D14 Curncy
Credit Rating (S&P)
Long Term Local Currency Issuer Credit Rating BBB+
Date Rating Effective 06/10/15
Ratings Outlook POS
Date Outlook Effective 03/04/17
Credit Rating (Moody's)
Issuer Rating Baa1
Date Rating Effective 17/06/15
Ratings Outlook STABLE
Date Outlook Effective 17/06/15
Credit Rating (Fitch)
Long Term Issuer Default Rating A-
Date Rating Effective 29/05/14
Ratings Outlook STABLE
Date Outlook Effective 29/05/14
Bloomberg Ticker: bbva sm equity
Capita l
Tier One Capital Ratio 12.1%
Market Cap (GBP millions)* 45,602
Bloomberg Ticker: bbva sm equity
*Converted from quoted currency based on prevailing exchange rate as of source date
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Banco Santander S.A.
0
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400
450
0
1
2
3
4
5
6
7
8
Jun
20
12
Dec
20
12
Jun
20
13
Dec
20
13
Jun
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14
Dec
20
14
Jun
20
15
Dec
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CD
S L
evel
Sh
are
Pri
ce
Banco Santander S.A. 5Y CDS CDS Benchmark
1Y
CD
S, 2
3.8
85
1Y
CD
S, 1
1.1
4
3Y
CD
S, 6
0.9
9
3Y
CD
S, 3
1.5
8
5Y
CD
S, 9
8.7
7
5Y
CD
S, 5
3.0
1
10
Y C
DS
, 1
39
.75
10
Y C
DS
, 8
3.8
95
0
20
40
60
80
100
120
140
160
Q1 2017 Q2 2017
CD
S L
evel (b
ps)
Share Pr ice
End of Q1 5.6505
End of Q2 5.6968
Change on Quarter (%) 0.82%
Bloomberg Ticker: bbva sm equity Bloomberg Ticker: san sm equity
Credit Default Swap (5Y)
End of Q1 98.77
End of Q2 53.01
Change on Quarter (%) -46.33%
Bloomberg Ticker: BBVA CDS EUR SR 5Y D14 Curncy Bloomberg Ticker: SANTAN CDS EUR SR 5Y D14 Curncy
Credit Rating (S&P)
Long Term Local Currency Issuer Credit Rating A-
Date Rating Effective 06/10/15
Ratings Outlook STABLE
Date Outlook Effective 09/06/17
Credit Rating (Moody's)
Issuer Rating A3
Date Rating Effective 17/06/15
Ratings Outlook STABLE
Date Outlook Effective 22/02/16
Credit Rating (Fitch)
Long Term Issuer Default Rating A-
Date Rating Effective 29/05/14
Ratings Outlook STABLE
Date Outlook Effective 29/05/14
Bloomberg Ticker: bbva sm equity Bloomberg Ticker: san sm equity
Capita l
Tier One Capital Ratio 12.53%
Market Cap (GBP millions)* 76,217
Bloomberg Ticker: bbva sm equity Bloomberg Ticker: san sm equity
*Converted from quoted currency based on prevailing exchange rate as of source date
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Bank of America Corporation
0
50
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0
5
10
15
20
25
30
Jun
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12
Dec
20
12
Jun
20
13
Dec
20
13
Jun
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14
Dec
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14
Jun
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Dec
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15
Jun
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Dec
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CD
S L
evel
Sh
are
Pri
ce
Bank of America Corporation 5Y CDS CDS Benchmark
1Y
CD
S, 2
5.4
5
1Y
CD
S, 1
7.1
6
3Y
CD
S, 4
1.8
4
3Y
CD
S, 2
9.9
2
5Y
CD
S, 6
3.0
6
5Y
CD
S, 4
9
10
Y C
DS
, 1
03
.36
5
10
Y C
DS
, 8
8.7
5
0
20
40
60
80
100
120
Q1 2017 Q2 2017
CD
S L
evel (b
ps)
Share Pr ice
End of Q1 23.59
End of Q2 24.26
Change on Quarter (%) 2.84%
Bloomberg Ticker: san sm equity Bloomberg Ticker: bac us equity
Credit Default Swap (5Y)
End of Q1 63.06
End of Q2 49
Change on Quarter (%) -22.30%
Bloomberg Ticker: SANTAN CDS EUR SR 5Y D14 Curncy Bloomberg Ticker: BOFA CDS USD SR 5Y D14 Curncy
Credit Rating (S&P)
Long Term Local Currency Issuer Credit Rating BBB+
Date Rating Effective 02/12/15
Ratings Outlook STABLE
Date Outlook Effective 02/12/15
Credit Rating (Moody's)
Issuer Rating Baa1
Date Rating Effective 28/05/15
Ratings Outlook POS
Date Outlook Effective 24/01/17
Credit Rating (Fitch)
Long Term Issuer Default Rating A
Date Rating Effective 15/12/11
Ratings Outlook STABLE
Date Outlook Effective 19/05/15
Bloomberg Ticker: san sm equity Bloomberg Ticker: bac us equity
Capita l
Tier One Capital Ratio 13.6%
Market Cap (GBP millions)* 181,890
Bloomberg Ticker: san sm equity Bloomberg Ticker: bac us equity
*Converted from quoted currency based on prevailing exchange rate as of source date
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Barclays Bank plc
0
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200
250
300
0
50
100
150
200
250
300
Jun
20
12
Dec
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12
Jun
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Dec
20
13
Jun
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14
Dec
20
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Jun
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Dec
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Jun
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Dec
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CD
S L
evel
Sh
are
Pri
ce
Barclays Bank plc 5Y CDS CDS Benchmark
1Y
CD
S, 3
2.2
6
1Y
CD
S, 1
0.1
25
3Y
CD
S, 5
5.4
85
3Y
CD
S, 2
7.1
65
5Y
CD
S, 7
7.8
5Y
CD
S, 4
0.9
2
10
Y C
DS
, 1
07
.79
5
10
Y C
DS
, 6
3.6
8
0
20
40
60
80
100
120
Q1 2017 Q2 2017
CD
S L
evel (b
ps)
Share Pr ice
End of Q1 225.1
End of Q2 202.75
Change on Quarter (%) -9.93%
Bloomberg Ticker: bac us equity Bloomberg Ticker: barc ln equity
Credit Default Swap (5Y)
End of Q1 77.8
End of Q2 40.92
Change on Quarter (%) -47.40%
Bloomberg Ticker: BOFA CDS USD SR 5Y D14 Curncy Bloomberg Ticker: BACR CDS EUR SR 5Y D14 Curncy
Credit Rating (S&P)
Long Term Local Currency Issuer Credit Rating A-
Date Rating Effective 09/06/15
Ratings Outlook NEG
Date Outlook Effective 07/07/16
Credit Rating (Moody's)
Issuer Rating A1
Date Rating Effective 12/12/16
Ratings Outlook NEG
Date Outlook Effective 12/12/16
Credit Rating (Fitch)
Long Term Issuer Default Rating A
Date Rating Effective 15/12/11
Ratings Outlook STABLE
Date Outlook Effective 15/12/11
Bloomberg Ticker: bac us equity Bloomberg Ticker: 8376923Z LN equity
Capita l
Tier One Capital Ratio 15.6%
Market Cap (GBP millions)* 35,592
Bloomberg Ticker: bac us equity Bloomberg Ticker: barc ln equity
*Converted from quoted currency based on prevailing exchange rate as of source date
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UNICREDIT SPA
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10
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20
25
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35
Jun
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12
Dec
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12
Jun
20
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Dec
20
13
Jun
20
14
Dec
20
14
Jun
20
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Dec
20
15
Jun
20
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Dec
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Jun
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CD
S L
evel
Sh
are
Pri
ce
UNICREDIT SPA 5Y CDS CDS Benchmark
1Y
CD
S, 6
0.4
8
1Y
CD
S, 3
0.9
85
3Y
CD
S, 1
14
.79
5
3Y
CD
S, 6
3.0
2
5Y
CD
S, 1
64
.09
5Y
CD
S, 9
1.2
6
10
Y C
DS
, 4
15
.23
5
10
Y C
DS
, 3
24
.27
0
50
100
150
200
250
300
350
400
450
Q1 2017 Q2 2017
CD
S L
evel (b
ps)
Share Pr ice
End of Q1 14.45
End of Q2 16.35
Change on Quarter (%) 13.15%
Bloomberg Ticker: ubsg vx equity Bloomberg Ticker: ucg im equity
Credit Default Swap (5Y)
End of Q1 164.09
End of Q2 91.26
Change on Quarter (%) -44.38%
Bloomberg Ticker: UBS CDS EUR SR 5Y D14 Curncy Bloomberg Ticker: UCGIM CDS EUR SR 5Y D14 Curncy
Credit Rating (S&P)
Long Term Local Currency Issuer Credit Rating BBB-
Date Rating Effective 18/12/14
Ratings Outlook STABLE
Date Outlook Effective 18/12/14
Credit Rating (Moody's)
Issuer Rating -
Date Rating Effective -
Ratings Outlook -
Date Outlook Effective -
Credit Rating (Fitch)
Long Term Issuer Default Rating BBB
Date Rating Effective 27/04/17
Ratings Outlook STABLE
Date Outlook Effective 27/04/17
Bloomberg Ticker: ubs ln equity Bloomberg Ticker: ucg im equity
Capita l
Tier One Capital Ratio 9.04%
Market Cap (GBP millions)* 33,740
Bloomberg Ticker: ubsg vx equity Bloomberg Ticker: ucg im equity
*Converted from quoted currency based on prevailing exchange rate as of source date
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This information has been prepared solely for information purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any investment offered by Meteor Asset Management.
The information is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. We do not undertake to update this information.
Meteor Asset Management Limited and its affiliates disclaim any and all liability relating to this information, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, this information. Additional information is available on request.
Meteor Asset Management Limited does not give investment, tax, accounting and legal or regulatory advice and investors should consult with their professional advisors.
Important Information
Approved and issued by Meteor Asset Management Limited.Meteor Asset Management is authorised and regulatedby the Financial Services Authority, FCA Number 459325.Financial Services Authority: 25 The North Colonnade, Canary Wharf, London E14 5HS.
Meteor Asset Management Limited55 King William StreetLondon EC4R 9ADTel +44 (0)20 7904 1010Fax +44 (0)20 7283 1355Email [email protected] www.meteoram.com