Analyst Note| Johann Scholtz, CFA |
Narrow-moat Credit Suisse announced a pretax loss of CHF 757 for the first quarter of 2021 compared with a CHF 1.2 billion pretax profit during the first quarter of 2020. This is in line with recent guidance and as previously announced, contained a CHF 4.4 billion impairment for family office Archegos' failed margin call. Credit Suisse expects to take a further CHF 600 million hit in second-quarter 2021 against the Archegos exposure. It has now exited 97% of the Archegos positions. Less clear is the position regarding Greensill, where Credit Suisse asset management clients are still waiting to receive around CHF 5 billion of investments caught up in the liquidation of the supply chain funding business. Seemingly three exposures totalling CHF 2 billion are the most problematic. In a major new development Credit Suisse announced it will raise CHF 1.8 billion of fresh capital, which will boost its common equity Tier 1 ratio by around 60 basis points. We can only speculate if it is a mere coincidence the amount set be raised is broadly equal to the amount of the problematic Greensill exposures. Due to the dilution from this capital call we anticipate we will reduce our current fair value estimate for Credit Suisse of CHF 14 by between 5%-10%.