The share price of the major Swiss bank falls on the negative news. And the guessing game starts.
Even Oswald J. Grübel makes timing mistakes. At the start of the year, the German doyen of Swiss banking said that Credit Suisse shares were a buy when they were just above 9 Swiss francs. After the news of the massive data leak broke Sunday, the bank's shares dropped below the 8 franc mark at times - their lowest level for the past three years.
«Bad News» Hits
The bank is jammed between headlines. Only in February, it reported an annual loss while defending itself in a federal money laundering trial. Now it is being accused of banking corrupt government heads and criminals. What is noticeable in all this is that every new piece of negative information seems to have a direct impact on its share price. Even though most observers, including ex-CEO Grübel, agree that the price for them is cheap.
And how. Current estimates seem to be that it is trading at about half of their intrinsic value. Credit Suisse head Thomas Gottstein, in a recent interview, almost seemed to be pleading to the «Finanz und Wirtschaft» newspaper (paywall) that «his» bank's securities were undervalued.
Falling Knife
«Fear is a bad advisor», said the Credit Suisse CEO during the interview. But traders seem to be staying away from an obvious falling knife. Leaving a question hanging – how much farther can the share price fall before another round of drastic measures are needed?
Many fear a further capital increase, which could be the last straw that breaks the patience of Credit Suisse's largest shareholders.
Lars Jakob Selsås, a share analyst at Zürcher Fonds-Boutique BWM, doesn't see the need for any urgency in getting into Credit Suisse. BWM sold its stake last March after the value investing experts held on to them during the years-long dry spell. «The risks in comparison to expected earnings potential became too large for us», Selsås told finews.com.
What Does Greensill Cost?
There has to be fundamentally positive news for there to be any buying, the expert said. But «the negative headlines related to Credit Suisse does not stop». Investors also had to recognize that each headline put pressure on the share price and its intrinsic value. The Archegos debacle in March 2021 cost more than 1.50 in book value, he calculated. «The Greensill fund issue could cost the bank billions again», he warned.
It is also unclear how the recent reputational damage will impact Credit Suisse's operational business. In 2021, it not only suffered a loss, but growth slowed in the fourth quarter, with net new assets falling to a trickle.
Fighting Fires
Will any further reporting of «Suisse Secrets» keep clients away? For some observers, the recent developments in wealth management seem to be closely linked to its reputation. «Reputation is hard to quantify», Selsås indicated. Pressure on the bank's shares is almost a given because of the numerous fires the bank is trying to put out.
The situation has not yet hit substantially. Capital and leverage quotas are benefiting from the Swiss Financial Market Supervisory Authority (Finma) directive to cut risk positions. Its CET1 ratio was 14.4 percent, clearly above necessary limits.
Little Buffer
But the bank has less of a buffer than people think, the BWM expert says. «14 percent CET1 is like the very minimum that one should expect from one of the main Swiss banks.»
Bank head Gottstein said in February that this year will be a transitional one. If Credit Suisse continues to experience setbacks the way it has, that statement could come to mean little.
