Tags: Credit Suisse | CS UBS | UBS | Switzerland | financials | banks | stocks

Credit Suisse: Conservatism Pays Off

By    |   Thursday, 21 Jul 2011 03:00 PM

Credit Suisse (CS), Switzerland’s second-biggest bank, has traveled a more conservative path than No. 1 bank UBS (UBS), insulating itself from much of the fallout from the 2008-09 credit crisis. Instead of focusing on esoteric U.S. mortgage securities, Credit Suisse has directed its energy toward investment and private banking. Nor should Europe’s current debt crisis hurt the bank much; its exposure to European government debt is trivial.

But that doesn’t mean all is smooth sailing for the 155-year-old institution. The U.S. Justice Department is hot on Credit Suisse’s tail for assisting Americans in hiding their assets in accounts at the bank, to avoid paying U.S. taxes.

The Swiss government also has placed onerous capital requirements on its two largest banks, making them keep common equity equal to 10 percent of risk-weighted assets and other capital equal to 9 percent.

So, while Credit Suisse stock probably represents a stellar long-term holding, now may not be the best time to take the plunge. In the first quarter, the bank performed particularly well in the investment banking arena, where its revenue rose more than analysts expected. That revenue hit a record of $5.4 billion in the quarter, up 8 percent from $5 billion a year earlier.

Happy trails

“Our investment bank continues to win market share with strong fixed income and solid equity sales and trading results as well as a solid performance in underwriting and advisory,” Credit Suisse CEO Brady Dougan said in a statement accompanying the earnings report.

“We are particularly pleased that the investment in this part of our business has begun to show a material impact on our performance.”

Others are optimistic too. Standard & Poor’s analyst Frank Braden has a four-star buy rating on Credit Suisse shares.

“CS has seen steady net inflows in its wealth management business, market share gains across numerous product lines, and strengthening capital ratios,” he writes. “Although we believe conditions in the financial markets remain fragile, we regard CS as well positioned relative to its peers.”

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Credit Suisse (CS), Switzerland s second-biggest bank, has traveled a more conservative path than No. 1 bank UBS (UBS), insulating itself from much of the fallout from the 2008-09 credit crisis. Instead of focusing on esoteric U.S. mortgage securities, Credit Suisse has...
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2011-00-21
Thursday, 21 Jul 2011 03:00 PM
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