Skip to main content

Market Overview

Credit Suisse Stock Buybacks 'Directly Affected' By Hedge Fund Liquidation: Analyst

Share:
Credit Suisse Stock Buybacks 'Directly Affected' By Hedge Fund Liquidation: Analyst

Credit Suisse Group AG (NYSE: CS) shares were losing ground Monday after the bank warned investors that its first-quarter earnings could take a big hit due to the unwinding of a U.S. hedge fund.

The near-term uncertainty was enough for at least one Wall Street analyst to downgrade Credit Suisse on Monday.

The Credit Suisse Analyst: BofA Securities analyst Alastair Ryan downgraded Credit Suisse from Buy to Neutral and cut the price target for the bank’s Swiss-listed shares from $14.91 to $13.31.

Related Link: BofA Upgrades CME Group, Bank Of NY Mellon On Expectations For Rising Interest Rates

The Credit Suisse Takeaways: Credit Suisse and Nomura both issued updates for investors after the two banks were reportedly forced to exit large positions in a U.S. hedge fund that defaulted on margin calls last week. The hedge fund in question is reportedly Archegos Capital Management.

Investment banks including Goldman Sachs Group Inc (NYSE: GS), Morgan Stanley (NYSE: MS) and Deutsche Bank AG (NYSE: DB) reportedly forced Archegos to liquidate its positions on Friday, which triggered sharp drops in some of its top holdings, including ViacomCBS Inc. (NASDAQ: VIAC) and Discovery Inc (NASDAQ: DISCK).

In the downgrade note, Ryan said Credit Suisse’s exposure to Archegos is just the latest in a series of missteps by the company that have put its 2021 buybacks at risk.

“After the series of issues the group has faced in recent months, across Greensill, mortgage backed securities litigation and a hedge fund write-down, we believe its capital cushion has likely been reduced to the point where its buyback is directly affected,” he said.

In fact, BofA also reduced its 2021 Credit Suisse buyback forecast by about $533 million.

Ryan said Credit Suisse’s attractive valuation should provide support for the stock, but the bank simply has too many problems for investors to ignore at this point.

Benzinga’s Take: Until the full degree of the losses is disclosed publicly, there’s no reason for investors to take a risk on Credit Suisse when there are plenty of other attractive bank stocks out there.

The Archegos-driven sell-off may ultimately prove to be an attractive long-term entry point for Credit Suisse investors, but there’s no way to know just how large the losses will be and just how much more downside the stock could have in the near-term.

Credit Suisse's Zurich headquarters. Photo by Roland zh via Wikimedia

Latest Ratings for CS

DateFirmActionFromTo
Apr 2021UBSUpgradesNeutralBuy
Apr 2021Exane BNP ParibasDowngradesOutperformNeutral
Apr 2021B of A SecuritiesDowngradesNeutralUnderperform

View More Analyst Ratings for CS
View the Latest Analyst Ratings

 

Related Articles (CS)

View Comments and Join the Discussion!

Posted-In: Analyst Color Downgrades Hedge Funds Price Target Analyst Ratings Movers Trading Ideas General Best of Benzinga

Latest Ratings

StockFirmActionPT
PHXSeaport GlobalInitiates Coverage On
AFCGLake StreetInitiates Coverage On29.0
OSSNoble Capital MarketsUpgrades7.0
NCNOGabelli & Co.Upgrades
HAECJS SecuritiesUpgrades
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com