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Credit Suisse Group AG CSGN

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Credit Suisse to Exit Prime Broking and Announces New 10% Return on Tangible Equity Target

Johann Scholtz, CFA Equity Analyst

Analyst Note

| Johann Scholtz, CFA |

Narrow-moat Credit Suisse reported pretax profits of CHF 1 billion for the third quarter of 2021, 26% higher than the CHF 803 million pretax profits it booked for the third quarter of 2020. Reported profits were alas, comfortably ahead of the CHF 863 million pretax profits the consensus of analysts polled by Credit Suisse itself expected for the quarter. Credit Suisse also hosted a capital markets day setting a 10% minimum return on tangible equity profitability target (the previous target was a 10%-12% return) and increasing its minimum common equity Tier 1 ratio to 14%--from 12.5% previously. Credit Suisse also announced the closure of its problematic prime equities operation, which was the source of CHF 5 billion losses following the recent Archegos debacle. We will revisit our model to incorporate the new guidance; we maintain our CHF 14/share fair value estimate for now. The Greensill matter is still unresolved and represents a downside risk to our valuation of around CHF 1/share--under a worst-case outcome.

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Company Profile

Business Description

Credit Suisse runs a global wealth management business, a global investment bank and is one of the two dominant Swiss retail and commercial banks. Geographically its business is tilted toward Europe and the Asia-Pacific.

Paradeplatz 8
Zurich, 8001, Switzerland
T +41 443336607
Sector Financial Services
Industry Banks - Diversified
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 49,950