Fitch Ratings has affirmed
Both ratings have been removed from Rating Watch Negative (RWN). Fitch has maintained Swisscard's Shareholder Support Rating (SSR) of 'bbb-' on Rating Watch Positive (RWP).
The affirmation and removal from RWN reflect Fitch's view of reduced short-term risks to Swisscard's franchise and business model stability from
Swisscard is a leading Swiss credit card provider and a 50-50 joint venture between CS Schweiz, and
Key Rating Drivers
Stability Over Outlook Horizon: Fitch believes immediate short-term risks to Swisscard's business model and profitability have reduced as
Standalone Credit Profile: Swisscard's Long-Term IDR is driven by its standalone credit risk profile and reflects its robust and low-risk business model with tight credit risk control, strong profitability and moderate leverage. The ratings are constrained by the company's monoline and geographically concentrated business model and reliance on wholesale funding with high asset encumbrance.
Strategically Important to CS Schweiz: In our view, Swisscard is strategically important but not core to CS Schweiz, resulting in an SSR that is one notch lower than CS Schweiz's 'bbb' VR, which anchors our support assessment. Fitch's assessment of shareholder support from CS Schweiz considers the shared jurisdiction, the manageable cost of potential institutional support relative to CS Schweiz's available resources, and synergies between CS Schweiz and Swisscard, given that Swisscard is the sole issuer of CS Schweiz's credit cards in
Factors limiting credit for potential shareholder support include the joint venture nature of Swisscard's ownership structure and the partially different branding.
Expected Change in SSR Anchor: Fitch currently uses CS Schweiz's VR rather than its Long-Term IDR as the anchor rating because of its view that there is insufficient certainty to assume that support would flow from CS Schweiz's owner through to Swisscard. However, once CS Schweiz has merged with
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
IDRs
Clear indications of a weakening of Swisscard's franchise, its ability to originate business or its competitive position in the Swiss credit card market as a result of a new strategic direction under the post-merger structure could lead to a downgrade of the IDRs.
A downgrade of Swisscard's Long-Term IDR by two notches, in conjunction with a weaker assessment of Swisscard's funding, liquidity, and coverage profile, could lead to a downgrade of its Short-Term IDR in line with Fitch's rating correspondence table.
SSR
A downgrade of CS Schweiz's VR would likely lead to a downgrade of Swisscard's SSR as long as CS Schweiz remains Swisscard's shareholder.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
IDRs
Upgrade potential for Swisscard's IDRs based on its standalone credit profile is unlikely in the short term, given the current uncertainties regarding its strategic direction under the announced new ownership. Swisscard's modest scale (in an international context), monoline business model and wholesale funding profile limit upside potential in the medium to long term. However, on a support-driven basis, the IDRs could be upgraded if the SSR was upgraded to 'a' or higher.
An upgrade of Swisscard's Long-Term IDR by one notch or a stronger assessment of Swisscard's funding, liquidity, and coverage profile, could lead to an upgrade of its Short-Term IDR.
SSR
Fitch currently uses CS Schweiz's VR as the anchor rating rather than its Long-Term IDR. However, we expect CS Schweiz to be absorbed by
An upgrade of CS Schweiz's VR would also lead to an upgrade of Swisscard's SSR, as long as Fitch maintains its current notching difference.
ADJUSTMENTS
The sector risk operating environment has been assigned above the implied score due to the following adjustment reason(s): regulatory and legal framework (positive).
The earnings & profitability score has been assigned below the implied score due to the following adjustment reason: revenue diversification (negative).
The funding, liquidity & coverage has been assigned above the implied score due to the following adjustment reason(s): funding flexibility (positive)
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
Swisscard's SSR is linked to CS Schweiz's VR.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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