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NEW YORK — Credit ratings agency Moody's Investors Service on Monday said it will review whether to lower key ratings for UBS AG, the huge Swiss bank that has been hit hard by the financial crisis and a U.S. legal probe into its American clients' offshore accounts.
Its shares fell 7 percent in afternoon trading.
Moody's currently rates the senior debt and deposit ratings of UBS at "Aa2." The bank financial strength rating of the company is at "B-."
The ratings review comes as challenges remain in tha bank's two largest business lines: investment banking and wealth management.
Zurich-based UBS warned last month it may have to hike credit provisions in coming quarters while posting another steep loss for its first quarter amid write-downs in its investment banking operations.
Moody's said that any downgrade would likely be limited to one notch.
But it added any challenges the UBS will face are "unlikely to be short-lived, and pose greater risk to bondholders than it had previously believed."
Investment banking remains exposed to potential additional losses, and the company's wealth management franchise faces customer privacy concerns, the credit ratings agency said in a statement.
"Repairing this damage may take time, especially in light of the legal obstacles UBS faces in reconciling the competing demands of U.S. and Swiss authorities over bank secrecy," David Fanger, a Moody's senior vice president, said in the statement."
At the same time, wealth management revenues are also under pressure due to market-driven declines in assets under management and reduced client activity, Moody's said.
Fanger added the bank has also "experienced a significant turnover of senior managers over the past two years, which gives us some concerns about the continuity and effectiveness of management."
Shares of UBS tumbled 90 cents, or 6.1 percent, to close at $13.94 Monday in New York amid a broad market decline. Its shares have traded between $7.04 to $25.72 during the past year.
