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Credit Suisse stock forecast: Can CS shares arrest spiral of doom price decline?

By Rob Griffin

Edited by Jekaterina Drozdovica


Updated

 logo on the offices of the Credit Suisse Bank Group in Warsaw.
Can CS shares arrest spiral of doom price decline? – Photo: B. Godart / Shutterstock

Credit Suisse (CS) has lost more than half its value this year as it wrestles with a number of problems.

The decline has been blamed on lingering debt and reputational problems associated with financial scandals and concerns about the group’s financial strength.

In addition, reports this week have claimed the US Justice Department is now investigating whether Credit Suisse helped US clients hide assets from authorities. 

But what does the future hold? Will the troubled bank be able to get back on track or is there further pain ahead for beleaguered investors? Here we take a look at what’s happened to the company, examine its most recent earnings, and consider other factors that are shaping Credit Suisse stock forecast.

What is Credit Suisse? 

The Credit Suisse Group is a financial services company. founded in 1856, the company now has more than 50,000 employees across the globe. It serves clients through four divisions: Wealth Management, Investment Bank, Swiss Bank and Asset Management.

The bank’s focus is on “strengthening and simplifying” the integrated model and investing in sustainable growth, while placing risk management at its core.

Shares in Credit Suisse Group are listed on the Swiss Exchange (SIX) under the ticker ‘CSGN’ and in the form of American Depositary Shares (ADS) on the New York Stock Exchange (NYSE) under ’CS’.

CS stock price analysis 

Any CS stock forecast has to consider the share price’s recent performance . The past year has been torturous for CS investors. At the beginning of November 2021, the CS stock price stood at just over $11. The all-time high stock price was $56.34 on 25 April, 2007. 

The longer term picture isn’t much better, with negative three-year trailing returns of -26.54% considerably worse than the -2% industry average, according to Morningstar as of 12 October.

CREDIT SUISSE STOCK 5Y CHART

Financial scandals hurt the share price 

A number of financial scandals certainly haven’t helped Credit Suisse over the past couple of years. They’ve been compounded by its disappointing financial performance. 

The Financial Times reported that senior Credit Suisse executives had been reassuring large clients and investors about the bank’s liquidity and capital position.

These followed concerns about its financial strength, with spreads on the bank’s credit default swaps, which offer protection against a company defaulting, having risen sharply. There had also been rumours of the bank approaching investors to raise capital.

Credit Suisse announced a buyback of some of its debt for approximately CHF3bn ($3.01bn) on 7 October, 2022. In a statement, the bank said:

“The transactions are consistent with our proactive approach to managing our overall liability composition and optimizing interest expense and allow us to take advantage of market conditions to repurchase debt at attractive prices.”

Credit Suisse reveals pre-tax loss in latest earnings

The company announced a pre-tax loss of CHF 1.6bn ($1.61bn) for the second quarter of 2022, compared to a CHF 428m ($430m) loss for the previous quarter. 

Thomas Gottstein, who was chief executive at the time, branded the results “disappointing”. In a statement, he pointed out they were affected by higher litigation provisions and other adjusting items. Gottstein added:

 “The bank’s performance was significantly affected by a number of external factors, including geopolitical, macroeconomic and market headwinds…These challenging circumstances led to results which overshadow the strength of our leading client franchises in all four divisions of the bank.”

The bank said “challenging economic and market conditions” had marked the second quarter. It noted heightened volatility in the wake of Russia’s invasion of Ukraine and significant monetary tightening by major central banks in response to the substantial increase in the rate of inflation.

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As far as the first half of the year was concerned, the bank noted net revenues had decreased year-on-year by 36%. This was driven by a 48% decline in Investment Bank revenues, while Wealth Management revenues fell 39%.

Ongoing strategic review

Gottstein, who announced in the same statement that he was stepping down from his role, insisted the bank was focused on the future, noting:

“The urgency for decisive action is clear and a comprehensive review to strengthen our pivot to the Wealth Management, Swiss Bank and Asset Management businesses, supported by a fundamental transformation of our Investment Bank, is underway.”

He also announced cost reduction measures: “We have now launched a broader cost efficiency and digital transformation program to reduce our absolute cost base to less than CHF 15.5 bn in the medium term.”

Gottstein has been replaced by Ulrich Körner, who became chief executive on 1 August, 2022. He joined Credit Suisse in 2021 from UBS. According to a press release in late September, 2022, the bank is “well on track” with its comprehensive strategic review, including potential divestitures and asset sales.

The firm confirmed that it would update the market further when it reports third-quarter results on 27 October, 2022. 

Credit Suisse stock forecast: Can the price recover?

So, what are the Credit Suisse stock predictions from analysts? The average stock rating is a ‘hold’, according to the combined views of 17 analysts compiled by MarketBeat, as of 12 October. 

However, opinions are divided. While nine analysts had ‘hold’ recommendations in place, five had the stock down as a ‘sell’ and three as a ‘buy’.

Over the previous 90 days, Credit Suisse stock has had two upgrades and two downgrades by analysts. Most recently, JP Morgan upgraded its rating from ‘underweight’ to ‘neutral’.

As far as a Credit Suisse stock forecast 2022 is concerned, price targets compiled by TipRanks, as of 12 October, predicted the stock to reach $4.50 over the next 12 months. However, this was based on the views of just one Wall Street analyst.

A Credit Suisse stock forecast 2025 could be heavily dependent on whether the bank’s senior executives are able to successfully navigate the problems being faced.

Johann Scholtz, equity analyst at Morningstar, didn’t believe the end is in sight for Credit Suisse, despite credit default spreads on its debt and the falling share price. He told Capital.com:

“In the absence of any new information around asset-quality concerns, we do not believe Credit Suisse is at risk of failing…However, we believe that Credit Suisse needs to raise capital to address wholesale funders’ fears.”

As far as his Credit Suisse stock forecast for the coming year is concerned, Scholtz highlighted a number of pressing issues. He pointed out how banks were more exposed to sentiment than less leveraged businesses – and insisted Credit Suisse’s “numerous recent risk management lapses” had inspired little confidence. He added:

“Wholesale funders are clearly demanding a greater capital buffer from Credit Suisse, which they justifiably view as one of the European banks most at risk of credit rating downgrades.”

Scholtz believes Credit Suisse could suffer further credit rating downgrades and warned it wasn’t inconceivable that it could lose its investment grade rating. This would affect his CS stock forecast.

“Credit Suisse's holding company credit rating by all three major rating agencies is only two notches above a high-yield rating,” he said. “All three agencies have placed Credit Suisse on a negative outlook.”

Note that analysts’ Credit Suisse share price forecasts can be wrong and shouldn’t be used as a substitute for your own research.

Always conduct your own due diligence on the stock before trading, looking at the latest news, a wide range of analyst commentary, technical and fundamental analysis. Note that past performance does not guarantee future returns. And never trade money you cannot afford to lose. 

FAQs

Is Credit Suisse a good stock to buy?

Whether Credit Suisse stock is a good investment for you will depend on a number of factors. These include your trading strategy, your personal circumstances, risk tolerance and portfolio composition. You should do your own research to develop an informed view of the market. Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decisions. Keep in mind that past performance is no guarantee of future returns. And never invest money that you cannot afford to lose.

Will Credit Suisse stock go up or down?

It’s impossible to say for definite. As far as a Credit Suisse stock forecast 2022 is concerned, analysts’ price targets compiled by TipRanks, as of 12 October predicted the stock to reach $4.50 over the next 12 months. However, this was based on only one Wall Street analyst. Note that analyst views can be wrong.

Should I invest in Credit Suisse stock?

That is your decision – and should be based on a combination of your own research into the Credit Suisse stock and your attitude to risk.

Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decisions. Keep in mind that past performance is no guarantee of future returns. And never invest money that you cannot afford to lose.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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