As shares of Credit Suisse Group AG (VTX:CSGN) hit multi-year lows – dropping below CHF 10 in Swiss Exchange trading for the first time since early this century (their 2008 bank crisis lows were in the mid-20s) – IG Group Holdings plc (LON:IGG) market analyst Laurent Bakhtiari takes a look at what might be ahead for the Swiss banking giant.
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Credit Suisse will not be able to keep its head above the water much longer
Laurent Bakhtiari, IG
Credit Suisse broke today the 10 CHF level. This is a shock for all the investors in the market. Even if we all expected this to happen at some point, it is hard to believe that it would happen so quickly and so easily. The 10 CHF was a strong psychological level and was broken so easily…
This recent drop is mainly due to the aftermaths of the Brexit (which causes all financial stocks to be lower) coupled by Tidjane Thiam’s recent statements about the fact that there will be no capital increase to improve the financial ratios.
Reality is : institutional investors and hedge funds are short on the stock and push the price lower every day. After years of poor management, seeing Credit Suisse being acquired by another company would not be surprising anymore, whereas it would have been inconceivable just a couple of months ago. This is a shame for the 2nd biggest Swiss bank and the 4th largest private bank in the world…
Years of poor management translates in decline of profitability and lower stock price. In fact, Credit Suisse’s price was divided by more than 9 in only 9 years and by more than 2.5 since Tidjane Thiam took the CEO role. The current market capitalization (about CHF 20bn) is ridiculously low and is comparable to companies such as Givaudan or Swisscom…
It is hard to see how the company will be able to keep its head above the water anymore.
Credit Suisse 1-year share price graph. Source: Google Finance.