The challenging but important investments business and changes at the top of Vontobel have now also set alarm bells ringing at Moody’s. The credit watchdog has set the ratings outlook for the Zurich investment firm as negative and is not anticipating any swift improvement.
The end-of-year ratings of the major agencies are due, prompting some banks, such as Basler Kantonalbank (BKB) (in german only) recently, to share their good grades with the whole world.
But Vontobel has not issued any press releases on creditworthiness. The Zurich investment house has hardly come out smelling of roses in the recent rating from Moody’s, one of the three powerful U.S. rating agencies.
In early December, the credit experts confirmed the ratings for Vontobel Bank’s long-term deposit ratings and the group company’s long-term issuer ratings as still a very solid Aa3 and A2. But the credit rating agencies have downgraded the outlook for the ratings to negative from stable and also provided a detailed explanation.
Steady Outflow of Assets
The negative outlook reflects Moody’s assessment that the Vontobel Group has recently flagged in terms of traction and performance in the asset management business, according to the note. The fund business with its range of boutiques is the investment firm’s most important source of income, but it has been experiencing outflows for months. As finews.ch reports, the division suffered net outflows of around 5.4 billion Swiss francs in the first nine months after the start of 2023.
This means that volumes used to generate fees in the future will be lacking, according to Moody’s rating. The report also says the lack of traction could have a negative impact on profitability and the competitive position over the forecast period of 12 to 18 months.
Governance Causing a Stir
The agency also lowered its ESG Credit Impact Score for Bank Vontobel, citing the downgrade of the issuer profile in the area of good corporate governance. «The Vontobel holding company has experienced several departures and new appointments at top management level, including the CEO and the chief operating officer (COO) of the group,» the note adds.
According to reports, long-time CEO Zeno Staub is leaving the group and will be replaced by a co-leadership consisting of Georg Schubiger (Wealth Management) and Christel Rendu de Lint (Asset Management).
«Moody’s anticipates the group will only gradually regain its ability to achieve profitable business growth, particularly through the generation of net new funds under the shared leadership of the new co-CEO team,» the credit analysts commented.
More Than a Warning
These ratings will certainly not make the task any easier for the new co-CEOs, who will take over the reins at Vontobel in early 2024, as a negative outlook from a rating agency is not just a warning that the financing conditions for the company may deteriorate. The credit rating watchdogs may actually take action in the coming months and downgrade the credit rating.
This would actually and immediately increase the investment firm’s cost of borrowing and raising capital.
