What analysts are saying about Credit Suisse after ‘central bank bazooka’ is unleashed
Wall Street analysts were divided on whether to buy into Credit Suisse – although they found the central bank’s support for the troubled Swiss company reassuring. U.S.-listed Credit Suisse shares rose more than 6% in premarket trading Thursday after the company announced it would borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank. Earlier, the central bank said it would provide Credit Suisse with liquidity if needed, as the company is well capitalized. On Wednesday, shares of Credit Suisse fell 13.9% after the company’s biggest investor, the Saudi National Bank, said it could not allocate more funds, raising fears of a banking crisis in Europe. However, following the decision to borrow from the central bank, JPMorgan’s Roberto Henriques reconfirmed an overweight position in the company. The analyst expects the “central bank bazooka” to calm investors worried about liquidity problems and give Credit Suisse enough time to formulate a restructuring plan. CS 5D Mountain Credit Suisse shares 5 days “The combination of actions should be enough to contain the negative moves in the capital structure as the market prices in the potential impact of liquidity pressures,” Henriques wrote to clients. “We think the coordinated move between the regulator, FINMA and the central bank … highlights that although Switzerland has been one of the most proactive jurisdictions in dealing with Too Big To Fail, the consequences of such an event are still very severe “While we are clearly sidelined by recent volatility in Credit Suisse, we maintain our overweight recommendation as we think the recent re-rating is overdone,” Henriques said. Henriques, of course, noted that any further market volatility could weigh on investor sentiment. Separately, RBC Capital Markets’ Anke Reingen reiterated a neutral rating for the bank on Thursday morning. The analyst said , that both the stronger liquidity position and the support from d The central bank are positive for the Swiss company but concerned about further challenges on the horizon. “Regaining confidence is key for CS stock. The measures taken should offer some consolation that spillover to the sector may be contained, but the situation remains uncertain,” Reingen wrote in a statement early Thursday. Meanwhile, Bank of America’s Alastair Ryan reiterated his buy rating, saying the joint statement from the Swiss National Bank and FINMA was “clear and supportive”. Not to mention that Credit Suisse is “heavily capitalized.” “The recent rapid fall in Credit Suisse debt prices reflects the pre-existing challenges the bank has faced, but also the large amounts outstanding, including $49 billion. The statement from the authorities is clear to us that Credit Suisse will continue in its current form,” wrote Ryan. “Through this statement, effective regulatory support has been provided, but without changing the structure or going concern of Credit Suisse. We believe this is materially discouraging for the group from an investor perspective,” said Ryan. Elsewhere, UBS analyst Daniele Brupbacher maintained a neutral rating on Wednesday, preferring to “remain on the sidelines” amid “challenges to be solved.” “While we believe CS remains in execution mode and working towards its targets, given the uncertainties on many fronts, a material re-rating in the coming quarters seems unlikely,” wrote Brupbacher. – CNBC’s Michael Bloom contributed to this report.