Credit Suisse’s stock (NYSE: CS) has lost approximately 69% YTD, as compared to the 21% drop in the S&P500 over the same period. Further, CS stock is currently trading around $3 per share, which is 43% below its fair value of $5 – Trefis’ estimate for Credit Suisse’s valuation. The Swiss bank missed the consensus estimates in the third quarter of 2022, with net revenues decreasing by 33% y-o-y to $3.9 billion. The drop was mainly because of lower investment bank and wealth management revenues. Further, the profitability numbers continued to suffer in Q3 as well – adjusted net income was down from $473 million to -$4.2 billion (Note – Credit Suisse originally reports in CHF (Swiss Francs), the same has been converted to USD for ease of comparison).
The bank’s top line decreased 37% y-o-y to $12.5 billion over the first nine months of 2022. It was mainly due to negative growth in the investment bank and wealth management divisions. Further, the firm announced a long-awaited restructuring plan with the third quarter results to strengthen its course correction measures. It intends to reorganize the investment bank segment and reduce operating expenses. In addition, there are media reports that CS is trying to raise fresh capital for the new investment bank unit.
Moving forward, we expect the same trend to continue in the subsequent quarters. Overall, Credit Suisse’s revenues are estimated to remain around $15.8 billion in FY2022 and $15.9 in FY2023. Additionally, CS is likely to report negative earnings in FY2022. However, the adjusted net income is expected to improve in FY2023 to $0.67 billion. This coupled with an annual EPS of $0.27 (2023) and a P/E multiple of just below 20x will lead to a valuation of $5.
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| Returns | Dec 2022 MTD [1] |
2022 YTD [1] |
2017-22 Total [2] |
| CS Return | -8% | -69% | -79% |
| S&P 500 Return | -7% | -21% | 69% |
| Trefis Multi-Strategy Portfolio | -8% | -24% | 206% |
[1] Month-to-date and year-to-date as of 12/29/2022
[2] Cumulative total returns since the end of 2016
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
