The failure of two American banks has caused uncertainty about the future of Credit Suisse Group (NYSE:CS), Switzerland’s second-largest bank. Credit Suisse recently announced its intention to borrow up to $54 billion (CHF 50 billion) from the Swiss National Bank in order to improve its liquidity position.
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The funds will be borrowed under a covered loan facility as well as a short-term liquidity facility, which is fully collateralized by high-quality assets.
Simultaneously, the bank is making a cash tender offer to buy back senior debt securities. The offer applies to ten US dollar-denominated securities for up to $2.5 billion and four euro-denominated securities for up to €500 million.
The news comes after Credit Suisse’s major shareholder, Saudi National Bank, ruled out the possibility of providing additional financial support. As a result, the stock declined 14% on the NYSE and 24% on the Swiss Exchange in yesterday’s trading session.
Is CS a Good Buy?
The Swiss lender’s prior involvement in scandals, leadership changes, and legal issues have long impacted the confidence of its shareholders. Moreover, the recent disclosure of “material weaknesses” in its 2002 annual report and liquidity issues add to the company’s woes.
Analysts prefer to remain on the sidelines for now. Credit Suisse has a Hold consensus rating based on one Buy, one Hold, and one Sell. Nevertheless, they expect CS stock’s price to rise 95.4% in 12 months based on their $4.22 price target.
