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.