Shares of Credit Suisse Group AG increased during European trade on Thursday, after JPMorgan analysts revised their rating of the firm.
Although the moment has come for the institution to go through a “final reorganization,” shares of Credit Suisse are still worth more than the market is presently pricing them at, according to an analyst at JPMorgan Chase & Co.
The JPMorgan analysts said in a note that the lender’s rumored plan to restructure itself by dividing its main investment bank into three parts and bringing back a so-called “bad bank” to store riskier assets had a beneficial impact, raising Credit Suisse to “neutral” from “underweight.”
According to media sources, Credit Suisse may decide to sell off significant portions of the business, such as its highly profitable securitized products section, in order to obtain money without having to turn to investors for more funding.
The JPMorgan analysts stated that this restructuring should help allay worries about Credit Suisse’s health, but they also cautioned that recent news reports describing scandals, losses, and lawsuits will still have an immediate effect on the company.
The fact that Credit Suisse would be required to execute a capital raising in order to strengthen its balance sheet was not a “guaranteed result,” they continued.
The bank’s management was encouraged to “consider at every alternative available to avoid a materially dilutive capital increase,” nevertheless.
Over the last year, the stock price of Credit Suisse has fallen by more than 55%.
Kian Abouhossein upgraded his rating on the company to neutral in a note and suggested that the Swiss bank shift away from investment banking and concentrate on wealth management, while at the current price management should look at every alternative to prevent a substantial dilutive capital increase.
Clarity on the bank’s restructuring plans can help to restore stability even while the bank is still being battered by negative news flow over its ambiguous strategy.
Abouhossein claims that Credit Suisse is currently worth at least $15 billion. Presently, the market value of Credit Suisse shares is about $11.4 billion.
