On Friday, the share price of Credit Suisse Group (NYSE:CS) jumped by 9.4%. This was the largest single-day gain since 2020 due to the fact that for most of this period, the stock trend has been lower. In fact, Credit Suisse shares are down 64% over the past year, hitting all-time lows. This is a huge move for one of the oldest and most prestigious banks in the world. So, is now a rare chance for me to buy the stock at cheap levels?
The story so far
There isn’t one specific failure that has caused the stock to drop so much over the past few years. Rather, several scandals and issues have occurred, one after the other. This headache has compounded to the point at which some people think there’s a possibility of the bank going bust.
One of the largest scandals came last year, when a hedge fund client named Archegos Capital went under. Credit Suisse acted as a counterparty to the trades that the fund placed, meaning that when the fund collapsed, Credit Suisse was left with a huge loss. When I say huge, I’m talking about $5.5bn, enough to ruin the Q2 2021 financial results. The bank was blamed for not conducting enough due diligence and also not handling risk well.
Only a few weeks ago, it issued another warning for the Q4 2022 results. It’s estimating a $1.6bn loss for the quarter due to wealthy clients withdrawing funds from the private banking division. This is on concerns from some billionaires that Credit Suisse was struggling to operate and could need more money to be pumped into the business.
Clearly, a business can’t lose billions of dollars regularly and still survive. As a result, the share price fall this year makes a lot of sense to me.
The voice inside my head
Despite this storm, I do have a small voice in my head that’s telling me to buy some Credit Suisse shares.
To begin with, this is a company that has been around for 166 years. It has been through tough periods before, including the global financial crisis and other recessionary times. It has always survived in some way or form. So even though it’s in another difficult situation, history is on my side.
For example, if I’d bought the stock in December 2008 or January 2009, I would have doubled my investment within a year (as the financial crisis eased). I’m not saying this will happen again next year, but it does show how investors can make a stock undervalued by selling it aggressively due to fear.
The business also acknowledges the problems it has. It’s not like management is pushing the problems to one side. The firm has a new CEO, appointed in July. A major restructure is due to begin. This includes selling off parts of the bank, cutting the workforce and focusing on profitable areas.
Why I’m tempted by Credit Suisse shares
Close to all-time lows, I do think this could be a once-in-a-lifetime opportunity to buy the stock. I’m going to buy a small amount over the coming week.
