After recovering from historical lows, Credit Suisse shares are headed in that direction again. Partly to blame are analysts' comments sent out well in advance of the capital increase.
The managers of Credit Suisse are currently indefatigable in promoting the strategy announced at the end of October as a great success. They repeatedly emphasize the coming year will also be a transitory one, for laying the foundations for future success.
Down 70 Percent
After Group CEO Ulrich Koerner presented the «new Credit Suisse» on various national and international media outlets, the head of the Swiss unit André Helfenstein spoke out in a lengthy interview about the prospects he sees for the bank in Switzerland.
Since the beginning of the year Credit's share price has lost about 70 percent of its value. Since the summer, the expectation of a substantial capital increase with a correspondingly large dilution effect had a considerable influence on the decline. The number of Credit Suisse shares increased by over 50 percent to around 4 billion with the capital raise, which was carried out in two steps.
Timing Far From Ideal
It was not unexpected the share price would fluctuate around the extraordinary general meeting and during rights trading. Credit Suisse was required to provide information about the heavy outflows in assets under management (AuM) in the issue prospectus at the end of November. The timing was far from ideal but unavoidable due to the publication requirements.
After bottoming out at 2.654 francs at the beginning of December, Credit Suisse shares fought their way back to over 3 francs. But after the critical analyst comments, those gains gave way, and shares traded at a low of 2.68 francs on Tuesday. Currently, the price is back at 2.769 francs.
The Crux of the Capital Raise
Since their banks were involved in the issuing process of the new shares issued with the capital increase, two analysts suspended their research coverage of Credit Suisse for a time, as required. Now the blow came belatedly.
Their analysis is now available in the completion of the capital increase. Analysts at Citigroup and RBC Capital Markets criticized Credit Suisse for not revealing enough details of its restructuring plan to prove how it will ensure its survivability, as reported by «Bloomberg» (behind paywall).
Warning of Big Losses
The Citi analyst wrote that he has low confidence in the Swiss bank's strategic plan based on the currently limited disclosure and the company's recent track record. He expects Credit Suisse to post a large loss in 2023 due to restructuring costs before returning to profitability in 2024. The stock was reinstated in the rating with a high-risk recommendation of buy.
At RBC, the analyst expects 2023 and 2024 to be transition years and assigned the bank a rating of Sector Perform.
