S&P: Schwyzer Kantonalbank Outlook Revised To Stable; 'AA+/A-1+' Ratings Affirmed
The outlook revision is based on the credit quality of the Canton of Schwyz. The canton fully owns the bank and guarantees its liabilities. Although we have withdrawn our ratings on Canton of Schwyz, we will monitor it closely to understand its ability and willingness to support SZKB; this assessment will remain a key component of our ratings on SZKB.
We consider SZKB to be a government-related entity (GRE) with an extremely high likelihood of receiving timely and sufficient extraordinary government support in times of stress. We base this opinion on SZKB's very important role for, and integral link with, its home canton, Schwyz. This provides a three-notch uplift from the 'a+' stand-alone credit profile (SACP), resulting in the 'AA+' issuer credit rating on SZKB.
Our ratings on SZKB also reflect the 'a-' anchor for Swiss banks, its adequate business position, very strong capital and earnings, adequate risk position, average funding, and strong liquidity. The SACP is 'a+'.
The stable outlook on SZKB reflects our expectation that the likelihood of support from the Canton of Schwyz will remain unchanged in the next two years.
The ratings on SZKB are sensitive to our assessment of the owner's ability and willingness to support the bank.
A change in SZKB's role for or link with the canton, or changes in the statutory guarantee, could lead us to reassess the bank's status as a GRE. However, we currently consider this scenario to be unlikely and would, in such a case, expect SZKB's existing obligations to be grandfathered.
An upward revision of our assessment of SZKB's 'a+' SACP is very remote at this stage, in our view, given the bank's comparatively concentrated business profile.