Fitch Ratings Ltd. has placed Swiss banking giants Credit Suisse and UBS on rating watch negative and downgraded their individual ratings on concerns about their profitability in the current market environment.

The rating agency said that its action on Credit Suisse indicates “concern over a worsening outlook for the bank’s operating environment, with [the fourth quarter] having been particularly challenging for global and investment banks.” It warned that this deteriorating outlook is “likely to result in ongoing significant pressure on Credit Suisse’s operating performance given the exposure to investment banking activities.”

It cited similar reasons for its actions on UBS’s ratings, saying the moves, “reflect Fitch’s concerns over the medium-term earnings outlook for the bank amid persistently challenging market conditions and uncertainty over the stability of UBS’s strong and important private banking and wealth management franchise.”

In addition, in downgrading UBS’s individual rating and placing it on RWN, Fitch said it is “signaling its concern over a worsening operating outlook for the investment bank.”

Fitch expects 2009 to be characterized by continuing economic uncertainty, and it warned that a short-term recovery in earnings “appears unlikely.” It also said that the economic environment will make it harder for firms to restructure their businesses.

“UBS has the additional challenges of realigning its investment bank to a lower risk footing and reversing the trend of negative net new money flows out of its wealth management and asset management businesses,” it said.

Fitch also noted that Credit Suisse has announced a restructuring of its investment banking business to reduce risk exposure and earnings volatility by concentrating on client-generated flow business. But Fitch warned that considering the continuing market dislocation since December, “a material improvement in the bank’s performance, at least in the short-term, is less likely now. Market conditions will also make it more difficult for the bank to sell risk positions and thereby reduce exposure and leverage.”