Credit Suisse (CS) shares fell as much as 7% on June 8, after the Swiss bank warned that it would report a loss for Q2 2022. However, the stock sharply reversed course and regained much of the ground it had lost, closing just 1% lower on the day.
Investors sought to cut their exposure to Credit Suisse after they heard that another quarterly loss was coming, a sign that the bank is not out of the woods yet. Credit Suisse reported losses for both Q4 2021 and Q1 2022. The company’s investment banking unit, in particular, has fallen on hard times, with the Wall Street Journal reporting that deals such as stock and bond sales that drive business for the division have diminished.
However, investors rushed back into Credit Suisse after they heard that State Street (STT) was considering a buyout bid for the troubled Swiss bank. Founded in 1792, State Street provides a variety of financial services to institutional clients. Its services include investment management, trading, and financial data analysis.
However, according to a Reuters report, some on Wall Street are skeptical about the acquisition since State Street has a pending acquisition deal with Brown Brothers Harriman for its Investors Services unit.
Credit Suisse CEO Calls Takeover Talk Rubbish
According to another WSJ report, Credit Suisse CEO, Thomas Gottstein, has come out to dismiss rumors about takeover discussions with State Street. The executive refuting the rumors said at a conference hosted by Goldman Sachs, “My father once gave me advice: For really stupid questions, you better don’t comment at all”.
What Is Credit Suisse Doing About Its Problems?
The Swiss bank has had a streak of misfortune in recent times. It lost more than $5 billion in the collapse of Archegos Capital Management, a family office whose troubles cost banks that worked with it more than $10 billion. The misfortunes and current macroeconomic headwinds, made worse by the war in Ukraine, have seen Credit Suisse’s stock drop more than 35% over the past year. A major problem for the bank is receding capital.
However, the bank is attempting a turnaround. It has decided to cut costs, a process that would include layoffs to shrink the headcount. It is looking to remove up to $1.5 billion in costs by 2024. The adjustments may help Credit Suisse shore up its capital position and become a more resilient bank.
Wall Street’s Take
The Street is bearish on Credit Suisse stock, giving it Moderate Sell consensus rating based on two Sells. The average Credit Suisse price forecast of $6.25 implies 9% downside potential from current levels.
TipRanks’ Stock Investors tool shows that investor sentiment is currently Negative on Credit Suisse, with 0.9% of portfolios tracked by TipRanks decreasing their exposure to CS stock over the past 30 days.
Key Takeaway for Investors
Credit Suisse’s future will mostly depend on how successfully it manages to cut its costs and navigates out of its many challenges. Although the bank denies being in talks with State Street about its takeover, speculation is rife that Credit Suisse’s may still end up in a deal. Some speculate that if not the whole company, then perhaps a unit of the bank could become a takeover target. The bank may end up accepting a buyout offer.
However, considering Credit Suisse’s currently depressed stock price, a takeover bid would need to offer a significant premium to look attractive.
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