Credit Suisse Group (NYSE:CS)(GB:0QP5) has urged its staff and investors not to judge its capital strength and liquidity based on the poor performance of its stock, the Wall Street Journal reported, citing an internal memo.
2022 has been harsh to this financial services giant. Legacy and litigation issues have weighed on its stock price. Though the company is taking measures to stabilize its business, nothing seems to work, as reflected by the downtrend in its stock. Notably, CS stock is down about 58% year-to-date, raising concerns over the viability of its business.
Credit Suisse is targeting lowering the cost base below CHF 15.5 billion in the medium term. Meanwhile, it plans to focus more on its Wealth Management and Swiss Banking businesses, and to turn the investment banking arm into an advisory-led banking business with a capital-light model.
On the restructuring plan, Deutsche Bank analyst Benjamin Goy stated that he expects the “Investment Bank to return to (marginal) profitability only in 2024, whereas Wealth Management and Asset Management pre-tax profit is expected to improve quicker from a low level this year. This means that the Swiss Bank is the cash cow of the group, generating a rather steady, double-digit return.”
Further, he highlighted that CS’s investment banking arm had generated lower returns despite a substantial portion of capital being allocated to this division.
Is Credit Suisse a Buy?
Given the challenges, Credit Suisse stock has received one Buy, seven Hold, and four Sell recommendations for a Hold consensus rating. Meanwhile, the average Credit Suisse Group price target of SFr.5.80 implies 48.2% upside potential from current levels.
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