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Credit Suisse (CS) Likely to Record Q4 Loss; Updates Outlook
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Credit Suisse Group AG’s new CEO, Thomas Gottstein, has had a tough time at the bank since assuming his role in February this year. Just after becoming CEO, Gottstein has had to defend losses that the bank incurred in the accounting fraud related to Luckin Coffee Inc. Moreover, from the questionable deals arranged for SoftBank Group to the $450-million impairment on the stake in York Capital Management along with the potentially surging legal provisions related to the residential mortgage-backed securities in the United States, Credit Suisse has continuously been hearing bad news. These are anticipated to lead the company into reporting a fourth-quarter 2020 loss.
Moreover, at an investor presentation recently, the bank said that it is not confident enough to be able to achieve its profit target in 2021. The bank said that achieving a return on tangible equity (“ROTE”) of 10-12% in 2021 will depend on whether its provisions return to levels similar to the pre-COVID numbers.
Nevertheless, it reconfirmed achieving the said ROTE target over the medium term.
Now, let’s take a look at some of the other financial targets that the bank mentioned at the investor day.
Key Targets
Credit Suisse informed that it is anticipating a 1-1.5 billion francs increase in Wealth Management-related pre-tax income over the next three years from the current level.
The company expects its common equity tier 1 ratio (CET1) to be at least 12.5% in the first half of 2021.
Adjusted operating expenses are anticipated at 16.2-16.5 billion francs for 2021.
The bank also confirmed dividend growth per year of 5%, and said that it expects to resume share buybacks in January 2021 and hence buy back shares worth 1-1.5 billion francs.
Over the medium term, the return on regulatory capital at the global investment bank is anticipated to be 10-15%. In fact, on the investment bank, Credit Suisse expects to spend another 50 million Swiss francs.
Notably, the asset management unit, which has always been a stable business unit, became the worst-hit unit because of the scandals and losses mentioned above and hence an area of concern for Gottstein.
In fact, after the company’s various businesses got affected by the increase in volatility caused by the coronavirus pandemic, Gottstein has been trying to simplify organization and has already started a review of the asset management business.
Gottstein combined investment banking and trading activities into one unit.
Nevertheless, as the company expands its investments in alternatives and private markets, and sells more of its products to wealth management clients, its asset management unit is anticipated to witness a significant turnaround in 2021.
Over the past six months, shares of Credit Suisse have gained 24.7% compared with 26.7% growth recorded by the industry.
Banks like JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) expect their investment banking and trading businesses to perform well in the to-be-reported quarter, driven by strong markets. Also, Citigroup (C - Free Report) expects its fixed-income and equity trading revenues to increase in the mid-teens in fourth-quarter 2020.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
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Credit Suisse (CS) Likely to Record Q4 Loss; Updates Outlook
Credit Suisse Group AG’s new CEO, Thomas Gottstein, has had a tough time at the bank since assuming his role in February this year. Just after becoming CEO, Gottstein has had to defend losses that the bank incurred in the accounting fraud related to Luckin Coffee Inc. Moreover, from the questionable deals arranged for SoftBank Group to the $450-million impairment on the stake in York Capital Management along with the potentially surging legal provisions related to the residential mortgage-backed securities in the United States, Credit Suisse has continuously been hearing bad news. These are anticipated to lead the company into reporting a fourth-quarter 2020 loss.
Moreover, at an investor presentation recently, the bank said that it is not confident enough to be able to achieve its profit target in 2021. The bank said that achieving a return on tangible equity (“ROTE”) of 10-12% in 2021 will depend on whether its provisions return to levels similar to the pre-COVID numbers.
Nevertheless, it reconfirmed achieving the said ROTE target over the medium term.
Now, let’s take a look at some of the other financial targets that the bank mentioned at the investor day.
Key Targets
Credit Suisse informed that it is anticipating a 1-1.5 billion francs increase in Wealth Management-related pre-tax income over the next three years from the current level.
The company expects its common equity tier 1 ratio (CET1) to be at least 12.5% in the first half of 2021.
Adjusted operating expenses are anticipated at 16.2-16.5 billion francs for 2021.
The bank also confirmed dividend growth per year of 5%, and said that it expects to resume share buybacks in January 2021 and hence buy back shares worth 1-1.5 billion francs.
Over the medium term, the return on regulatory capital at the global investment bank is anticipated to be 10-15%. In fact, on the investment bank, Credit Suisse expects to spend another 50 million Swiss francs.
Notably, the asset management unit, which has always been a stable business unit, became the worst-hit unit because of the scandals and losses mentioned above and hence an area of concern for Gottstein.
In fact, after the company’s various businesses got affected by the increase in volatility caused by the coronavirus pandemic, Gottstein has been trying to simplify organization and has already started a review of the asset management business.
Gottstein combined investment banking and trading activities into one unit.
Nevertheless, as the company expands its investments in alternatives and private markets, and sells more of its products to wealth management clients, its asset management unit is anticipated to witness a significant turnaround in 2021.
Over the past six months, shares of Credit Suisse have gained 24.7% compared with 26.7% growth recorded by the industry.
Currently, Credit Suisse carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Financial Targets of Major U.S. Banks
Banks like JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) expect their investment banking and trading businesses to perform well in the to-be-reported quarter, driven by strong markets. Also, Citigroup (C - Free Report) expects its fixed-income and equity trading revenues to increase in the mid-teens in fourth-quarter 2020.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>