Credit Suisse Will See Lower Banking Revenues

Eurobanks could witness an increase in their CoE [Cost of Equity], given the material uncertainty surrounding the UK and EU banking sector, following Brexit, JPMorgan’s Kian Abouhossein said in a report. He reconfirmed a cautious view on the banking sector, while estimating EPS forecast cuts by 2018 by an average of 13 percent.

Credit Suisse

Analyst Kian Abouhossein downgrade the rating for Credit Suisse Group AG (ADR) (NYSE: CS) from Neutral to Underweight, while reducing the price target from SF15 to SF11.

Abouhossein expects Credit Suisse to suffer a decline in IB and Private Banking revenues on account of Brexit. He added that the macro uncertainty created by the Brexit vote could have a “material impact on IBD activity” in the back half of 2016.

“We do not see material cost offsets to the revenue decline with JPMe costs of SF19.2bn in 2016E already below management cost target of SF19.8bn which they expect to meet or beat,” the analyst wrote.

The adj. EPS estimates for 2016, 2017 and 2018 have been reduced from SF 0.30 to SF (0.10), from SF 0.99 to SF 0.50 and from SF 1.44 to SF 0.95, respectively.