Where Is Credit Suisse Stock Headed?

+50.04%
Upside
3.56
Market
5.34
Trefis
CS: Credit Suisse logo
CS
Credit Suisse

Credit Suisse’s stock (NYSE: CS) has lost approximately 65% YTD, as compared to the 16% drop in the S&P500 over the same period. Further, CS stock is currently trading around $3 per share, which is 51% below its fair value of $7 – Trefis’ estimate for Credit Suisse’s valuationThe Swiss bank underperformed the street expectations in the third quarter of 2022, with net revenues decreasing 33% y-o-y to $3.9 billion. It was primarily due to a drop in investment bank and wealth management segments. Overall, the adjusted net income reduced from $473 million to -$4.2 billion (Note – Credit Suisse originally reports in CHF (Swiss Francs), the same has been converted to USD for ease of comparison).

The investment bank announced a restructuring plan with the Q3 earnings, where it intends to rearrange some existing businesses and reduce costs. It plans to reorganize the investment bank segment, with one unit for its markets business and a separate division for investment banking (under the CS First Boston name). Further, the firm intends to leave a few businesses, reduce its exposure to securitized products, and raise fresh capital. In a recent development, several media houses reported on 6th December that Saudi Arabian Crown Prince Mohammed bin Salman and some other investors are in talks with the firm to invest in the new investment bank unit. 

The bank’s top line is likely to drop in the current year on a year-on-year basis. The main reason is lower investment bank and wealth management revenues. However, we expect the revenues to improve after that. Altogether, we estimate Credit Suisse’s revenues to remain around $15.8 billion in FY2022 and $18.54 in FY2023. Additionally, the profitability numbers are likely to be negative in 2022. But, it is anticipated to touch $1.1 billion in FY2023, with improvement in revenues and lower expenses. This coupled with an annual EPS of $0.44 (2023) and a P/E multiple of just below 16x will lead to a valuation of $7.

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 Returns Dec 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 CS Return 2% -65% -76%
 S&P 500 Return -2% -16% 79%
 Trefis Multi-Strategy Portfolio -2% -19% 220%
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[1] Month-to-date and year-to-date as of 12/6/2022
[2] Cumulative total returns since the end of 2016

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