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Goldman Sachs analysts led by Chris Hallam estimated that Credit Suisse (NYSE:CS), the bank that’s been struggling to turn itself around after years of scandals and missteps, may face a capital shortfall of up to CHF 8B ($8.1B) in 2024.
Weaker earnings, along with risk-weighted asset inflation and the risk of continued litigation and restructuring costs, “create capital pressures,” the analysts said. And while disposals could ease some of that pressure, price/book multiples are at depressed levels.
Goldman calculates a potential capital shortfall of CHF4B-8B in 2024, when analyzing the company’s capital position, CET1 targets, and litigation/restructuring costs.
“Given our view that the investment bank requires restructuring while capital generation is minimal, we now view an equity raise as prudent to preserve a buffer,” the analysts wrote.
Credit Suisse (CS) ADSs dropped 2.6% in Tuesday afternoon trading.
The analysts also reduced their EPS estimates for 2022 to -CHF 0.46 from -CHF 0.27 previously and for 2023 to CHF 0.47 from CHF 0.65. For 2024, EPS of CHF 0.96 is expected.
Last week, Allianz SE’s (OTCPK:ALIZF) and an investor group including Centerbridge Partners were reported to be on a shortlist of bidders for Credit Suisse’s (CS) Securitized Products Group.
In late September, the bank’s stock came under pressure amid reports that it sounded out investors about raising fresh capital. Over a week ago, CS’s senior executives reportedly called large investors, counterparties, and clients to reassure them that the company has sufficient liquidity.
Earlier, Bloomberg reported that the Department of Justice is investigating whether Credit Suisse (CS) assisted its U.S. clients in hiding assets from the Internal Revenue Service.
