October has been a golden year for Credit Suisse shareholders so far. The stock has rebounded strongly on the trading floor since its lowest opening price ever recorded. A week ago Monday, headlines started at 3.52 francs, shaken badly by rumors of a capital increase or bankruptcy.
A week later, the stock started trading at CHF 4.59. This corresponds to a 30 percent increase in value. The price has dropped a bit during the day – but at 4.35 francs the share is still well above its all-time low.
Is the worst over for the big Swiss bank? It’s still too early for a definitive answer, what Vontobel analyst Andreas Venditti (50) said a week ago is far more accurate: “Management must break these negative rumors and price losses.”
Important signals to shareholders
The bank leadership seems to have been successful for now, especially with the announcement that they will buy back their own debt securities. It’s not about saving on debt interest, it’s about sending the signal: Look, we have enough financial strength to reduce our debt. Therefore, a capital increase is highly unlikely, even if the bank’s senior management cannot rule it out entirely. Probably also to keep all options open.
Because CS shouldn’t be able to find their way out of the lost zone this year. Rating agency Moody’s expects annual losses of approximately three billion francs for the bank. Analysts at US bank JP Morgan put the bank’s market value at around 15 billion francs, giving shareholders some hope. It’s about three billion more than the bank is currently worth. So there’s a lot of room for improvement out there.
Will the share price double?
After all, after all the negative rumors that contributed to driving the share price to a record low, once again positive signals are coming from the US. A cash insider writes that there is also support for the CS share from Germany. A well-known market letter even advises investors to get started and sees the potential to double the stock’s value. But the price would still be less than 10 francs.
The CS summit should now surrender on October 27 – then they want to inform about the planned restructuring measures and specifically the savings program of up to 1.5 billion. The new bank is likely to build on the Swiss and Asian pillars, with a significant reduction in investment banking activity, particularly in the US. It is important that restructuring plans appear concrete and plausible, and that the program does not put shareholders off for too long. Otherwise, the recovery of the CS share may end quickly.