Credit Suisse Stock Missed The Consensus In Q4, Is It Fairly Priced?

+38.93%
Upside
5.76
Market
8.00
Trefis
CS: Credit Suisse logo
CS
Credit Suisse

Credit Suisse’s stock (NYSE: CS) has lost approximately 16% YTD as compared to the 7% drop in the S&P500 over the same period. Further, at its current price of $8 per share, it is trading 17% below its fair value of just above $10 – Trefis’ estimate for Credit Suisse’s valuationThe bank missed the consensus estimates in Q4 2021, with the net revenues declining 14% y-o-y to $4.97 billion. This was driven by lower revenues in the investment banking, sales & trading, and wealth management divisions, partially offset by positive growth in the asset management business. Further, the firm’s pre-tax income significantly decreased from -$97 million to -$1.8 billion in the quarter, primarily due to a goodwill impairment charge of $1.8 billion. This resulted in an adjusted net income of -$2.3 billion (Note – Credit Suisse originally reports in CHF (Swiss Francs), the same has been converted to USD for ease of comparison).

The company’s total revenues increased 4% y-o-y to $24.8 billion in 2021. The growth was mainly due to asset management and Swiss universal bank revenues. While the investment banking revenues jumped 36% y-o-y in the year, it was almost offset by a 17% drop in the sales & trading business. That said, the positive increase in the top-line failed to translate into higher adjusted net income, which decreased from $2.8 billion to -$1.8 billion. It was due to an increase in the provisions for credit losses from $1.2 billion to $4.6 billion coupled with a goodwill impairment charge of $1.8 billion. Notably, CS faced several challenges in 2021, including the collapse of Greensill Capital and the Archegos Capital crisis, which has taken a toll on its bottom line.

The low-interest-rate environment is expected to improve in FY2022, benefiting the net interest income of lenders. However, sales & trading and investment banking revenues are likely to normalize with recovery in the economy. This will negatively impact the bank’s top-line. Overall, Credit Suisse revenues are expected to remain around $23.2 billion in FY2022. Additionally, CS’ adjusted net income is unlikely to make a quick recovery in the year as restructuring charges and higher compensation charges will hurt the bottom line. The bank is expected to report an annual EPS of $1.23 in FY2022, which coupled with a P/E multiple of 8x will lead to the valuation of $10.

Relevant Articles
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  3. Is Credit Suisse Stock Undervalued?
  4. What To Expect From Credit Suisse Stock Over The Next One Month?
  5. Credit Suisse Stock To Miss The Earnings Consensus In Q2, Revenues To Beat Expectations
  6. Credit Suisse To Pay Additional $750 Million In Greensill Crisis

Here you’ll find our previous coverage of Credit Suisse stock, where you can track our view over time.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

 

 Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 CS Return -2% -16% -43%
 S&P 500 Return 2% -7% 99%
 Trefis MS Portfolio Return 2% -8% 262%

[1] Month-to-date and year-to-date as of 3/21/2022
[2] Cumulative total returns since the end of 2016

 

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