Revenue Attrition Leads Us to Reduce Our Fair Value Estimate for Credit Suisse

The revenue attrition that Credit Suisse CS recently reported for the final quarter of 2022 was materially worse than we anticipated. The wealth-management business lost 27% of assets under management, and the company earned no revenue from security trading. We now expect Credit Suisse to remain loss-making until 2024. The unnecessarily complicated restructuring program adds execution risk. We believe that liquidity and solvency are adequate, but the margin for error has become thinner. We reduce our fair value estimate to CHF 2.90 per share from CHF 4.50.

We now expect Credit Suisse to generate a midcycle return on tangible equity of 4% with an 87% cost/income ratio. The path toward Credit Suisse’s already low target of 8% return on equity is unclear to us.