Credit Suisse Q3 earnings preview: Where next for Credit Suisse stock?

Downward trend
Fiona Cincotta
By :  ,  Market Analyst

When will Credit Suisse release Q3 earnings?

Credit Suisse is scheduled to release Q3 results on Thursday, October 27 before the open. A conference call will be held by management on the same day at 06:45-11:45 CEST. The strategic update is also expected between 10:30-12:45 CEST. 

Credit Suisse Q3 earnings consensus

Credit Suisse is expected to report revenue of CHF 4 billion, down 27% from the same period in 2023. Meanwhile, a pre-tax loss of CHF 559.9 million is expected compared to a CHF1 billion profit the year before.

Credit Suisse earnings preview

Major European central banks will take centre stage as they release earnings this week. Perhaps the most hotly awaited will be Credit Suisse which plans to also announce a major overhaul as it aims to win back the confidence of investors.

Credit Suisse’s share price has lost around half of its value this year, falling to an all-time low in September amid unsubstantiated rumors that the bank is teetering on the brink of collapse.

The scandals

Credit Suisse has been embroiled in a series of scandals over the past year or so, including the failure of Greensill Capital, which saw Credit Suisse clients lose as much as $3 billion on their investments. Credit Suisse lost $4.7 billion due to its involvement with Archegos Capital. Earlier this year, the bank was charged with being involved with money laundering and in the same month, details of 30,000 accounts holding more than 100 billion Swiss Francs in accounts at Credit Suisse were leaked.

There have also been other complaints and sanction requirements related to requests to destroy documents linking Russian oligarch’s loans since the start of the war in Ukraine. Just this week Credit Suisse agreed to pay €238 million to settle a tax fraud case.

These scandals have hurt the bank’s image; investor confidence has tumbled, and market capitalisation has dropped over 50%. Concerns over the stability of the bank have also risen despite the bank insisting that it has a strong capital base and liquidity position.

The rate for credit default swaps on Credit Suisse debt has spiked this year, rising from under 1% to close to 6%. A higher rate suggests the market believes bankruptcy is more likely.

Reform, asset sale & raising capital

Along with the results, Credit Suisse is set to announce a huge restructuring plan. Credit Suisse’s chairman Axel Lehmann has pledged to reform the bank after a terrible few years which has seen the bank lose billions, so all eyes are on the report to see what the bank plans to pull out of the hat and whether it will be enough to calm fears.

The bank could look to raise capital to finance its reshaping to win back investor confidence. The bank has already made a couple of disposals and is also looking for a buyer for a luxury hotel in Zurich, among other moves. There are doubts over whether its asset sale will be enough or whether the bank will have to turn to investors for more capital.

It is estimated that a capital hole of CHF 4-9 billion needs to be plugged to restructure operations and absorb regulatory requirements and buffer against the unknown.

Credit Suisse has reportedly been approached by Saudi Arabian and Abu Dhabi sovereign funds to take advantage of the low valuation.

Short bets rise

Investors believe that the share price could have further to fall, with a spike in short positions in recent weeks. There has been a four-fold increase in short positions on Credit Suisse. Data from S&P Global Market Intelligence shows 15.9% of the bank’s stock was on loan, up from 3-4% just a few weeks earlier before questions over its financial health surfaced.

Where next for Credit Suisse share price?

Credit Suisse has been trending lower across the year, forming a series of lower highs and lower lows. The stock price reached a record low of $3.70 at the start of this month.

While the price has rebounded off this low and risen above its 20 sma and $4, it still trades below the falling trendline and the 50 sma.

Sellers will look for a move below the 20 sma at 4.34 and the all-time low of 3.70 to create a lower low and bring 3.00 round number into play.

Buyers will look for a move over 4.90 the 50 sma and falling trendline to head towards 5.68, the September high

 

 

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