Credit Suisse shares gain after horrific earnings update! What’s going on here?

Credit Suisse shares gained 2% in pre-market trading on Wednesday despite massively underperforming and parting ways with its CEO.

| More on:
Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.

Image source: Getty Images

Credit Suisse (NYSE:CS) shares reversed their downward trend on Wednesday. The embattled bank has seemingly pleased investors by parting ways with Chief executive Thomas Gottstein and vowing to undertake another strategic review.

So, let’s take a closer look at the earnings report, and whether the stock now looks like a buy for my portfolio.

What did the bank say on Wednesday?

On Wednesday, Credit Suisse posted a CHF1.59bn second-quarter loss, badly missing market expectations. Analysts had expected a net loss of CHF206m. The Zurich-based bank’s losses exceeded expectations by eight times!

Losses were driven by the poor performance of the investment bank and trading businesses, as well as higher litigation expenses. Credit Suisse also saw net outflows of CHF7.7bn as clients traded less and reduced risk to fluctuating equity markets.

It was the lender’s third straight quarterly loss.

The bank announced a strategic review into its operations and parted ways with its CEO. Gottstein’s two years in charge had been marked by scandal and huge losses. He was brought in to stabilise the bank after it was embroiled in a spying scandal. But things didn’t go to plan. Gottstein only announced a new plan for the bank, going easy on investment management, at the end of 2021.

Credit Suisse named asset management expert Ulrich Koerner as its new chief executive.

Reputation in tatters

Credit Suisse has been hit by scandal after scandal in recent years. From failing to prevent money-laundering by a Bulgarian cocaine trafficking gang between 2004 and 2008, to a spying scandal that saw chief executive Tidjane Thiam hire private detectives to snoop on its former head of wealth management Iqbal Kahn.

The bank also pleaded guilty to defrauding investors out of $850m in a deal to fund a Mozambican fishing fleet. Credit Suisse bankers received $200m in returned loans as kickbacks.

More recently, a Bermuda court ruled that former Georgian prime minister and billionaire Bidzina Ivanishvili was due hundreds of millions in damages after a former Credit Suisse executive was found guilty of forging the signatures of clients over eight years.

And then there was the Greensill collapse.

This is by no means an exhaustive list of the Credit Suisse scandals.


There is some good news for Credit Suisse. Its CET1 equity ratio — a metric that compares cash against assets — stood at 13.5% of risk-weighted assets, hitting its near-term target of 13.5%.

It also remains one of the largest asset managers on earth, with over CHF1.6trn under management. It’s an A-rated bank and has 50,000 employees around the world.

There has also been progress in terms of its restructuring and absorption of bad assets. Global markets, investment banking, and APAC markets have all been rolled into a a larger investment-banking segment.

Its wealth management business is also hugely profitable. And investors will be happy to see a pivot back in this direction. Although it’s worth considering that the world’s billionaires may be increasingly concerned about the bank’s reputation.

However, Credit Suisse is still reliant on its low margin, higher-risk investment banking operations. It’s worth noting that Swiss peer UBS has completely abandoned its investment banking segment.

Personally, I’m keeping well away from Credit Suisse, so I won’t be buying this stock.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

James Fox has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mixed-race female couple enjoying themselves on a walk
Investing Articles

UK shares: 1 burgeoning tech stock to buy for returns and long-term growth!

Jabran Khan is looking for the best UK shares to buy for his holdings that provide excellent returns and growth…

Read more »

Black father holding daughter in a field of cows
Investing Articles

2 FTSE 100 shares I’d buy for lifelong passive income!

These FTSE 100 shares have proved to be excellent dividend stocks for many years. Here's why I think they'll continue…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

1 cheap penny stock that boosts passive income and has great growth prospects!

This Fool likes this penny stock that currently looks good value for money, has an enticing dividend yield, and growth…

Read more »

Sun setting over a traditional British neighbourhood.
Investing Articles

Will the Taylor Wimpey share price rebound soon?

The Taylor Wimpey share price has jumped 10% since it bottomed last month. But will it continue its rally and…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Should I buy this growth stock at £10?

The ASOS share price has tumbled to its lowest price in the last 10 years. Surely at £10 per share,…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Is the bear market in stocks over? I fear not!

After the worst first-half bear market in 52 years, US stocks have rebounded in the past month. But what should…

Read more »

Happy male couple looking at a laptop screen together
Investing Articles

Is this FTSE 250 stock one of the best to buy for consistent growth and returns?

Jabran Khan takes a look at whether this FTSE 250 tech stock could be a good addition to his portfolio…

Read more »

Girl and father putting coin into piggy bank, sitting on sofa at home
Investing Articles

Here’s why I’d buy Legal & General shares to bag 7.5% dividends today

Legal & General shares are picking up, as the company reaches the halfway stage in its five-year cash and dividend…

Read more »