Credit Suisse Group AG’s troubles are most likely to end in a takeover of the Swiss bank, according to analysts at JPMorgan Chase & Co.
Analysts led by Kian Abouhossein laid out three scenarios and said that a takeover — with rival UBS Group AG a probable suitor — is the most likely.
Credit Suisse declined to comment. UBS didn’t immediately respond to a request for comment.
Abouhossein warned last month that the Credit Suisse franchise was deteriorating faster than expected, and the shares have fallen 25% since then. He upgraded the shares to neutral from underweight in October, saying that the lender has a minimum value of $15 billion. The current market capitalization is just under $9 billion.
Credit Suisse’s capital position isn’t an issue, but the “situation is about ongoing market confidence issues with its IB strategy and ongoing franchise erosion,” Abouhossein wrote in today’s note. “Status quo is no longer an option.”
See also: MAS fines Credit Suisse $3.9 mil for misconduct by its relationship managers
JPMorgan’s scenarios for Credit Suisse:
- Takeover, likely by UBS; possibly followed by a listing or spinoff of the Swiss Bank, worth 10 billion Swiss francs, given the market concentration between Credit Suisse and UBS.
- The Swiss National Bank stepping in with full deposit guarantee or injecting equity. That would give Credit Suisse time to restructure but it would be highly dilutive for existing shareholders.
- A “self-help approach,” with the closure of the investment bank. Still, this may not be enough to reduce market concerns.
Still, analysts at Bank of America Corp. — one of just two firms tracked by Bloomberg that rate Credit Suisse a buy — said they believe support from the Swiss National Bank is a clear message it will continue in its current form. Among other views, KBW analysts said a breakup is the most likely solution, with further asset sales to “simplify the bank.”
In a memo to staff early on Thursday, Credit Suisse CEO Ulrich Koerner said that the bank would continue to focus on the transformation of the lender. The shares jumped as much as 40% on Thursday after the lender tapped the Swiss National Bank for as much as 50 billion francs. UBS CEO Ralph Hamers on Wednesday declined to answer any “hypothetical” questions about Credit Suisse.
