Macquarie Research Looks Into Credit Suisse's Tea Leaves

• Year-to-date, Credit Suisse Group AG (ADR) CS has dipped 1.3 percent.
• Piers Brown at Macquarie Research said that ahead of Credit Suisse's strategy review next week, the firm is likely to announce cost cuts between 1.5 and 2 billion Swiss francs.
• For Brown, that is about an "evolution rather than revolution" of the business – something he predicts could underwhelm the market.

When Credit Suisse hired a new CEO in June, investors took it as a "prelude to radical change" in the company, Macquarie's Piers Brown said. However, based on Swiss media reports which suggest the firm will undertake CHF 1.5 to 2 billion in cost cuts, that appears less and less likely as the company heads into its strategy review next week.

Brown contrasts that with the belief that Credit Suisse could do something like deleverage some of its CHF 150 billion investment banking business, which would necessitate CHF 3 billion in cost cuts in and of itself. Similarly, Brown found it less likely that the firm would offer "ambitious" growth targets that could achieve higher return on tangible equity.

Brown argued that without sufficiently ambitious targets, an announcement would indicate that the business would "be maintained in more or less its existing form," a decision that "underwhelms" the market. As such, Brown reiterated his 12-month price target near current price at US$25.06 or CHF 24.00.