By Jamie Chisholm
Shares in Credit Suisse slumped nearly 7% to flirt with a record low on Tuesday after downgrades by two credit rating agencies highlighted the challenges facing new boss Ulrich Koerner as he tries to turn around the beleaguered Swiss bank.
Moody’s Investors Services downgraded the lender’s senior unsecured debt from Baa1 to Baa2 and kept its negative outlook. S&P Global Ratings meanwhile cut Credit Suisse’s credit outlook from stable to negative.
Both Moody’s and S&P alluded to the difficulties Switzerland’s second biggest bank faces as it tries to restructure following a period of scandals and trading mistakes. These include the failures of Greensill Capital and Archegos Capital Management, which contributed to losses of nearly four billion Swiss francs /zigman2/quotes/210561065/realtime/sampled CHFUSD -0.1423% in the past three quarters, according to Bloomberg.
“We see increasing risks to the stability of the bank’s franchise, uncertainty around the reshuffling of top executives, and a lack of a clear strategy, and we think the group’s risk-adjusted and absolute profitability is likely to remain weak over the medium term,” S&P said in a statement released on Monday.
Last week Thomas Gottstein was replaced as CEO by Ulrich Koerner after the lender revealed a bigger-than-expected CHF1.6 billion ($1.65bn) loss for the second quarter. Koerner has pledged a comprehensive review of Credit Suisse’s business that will focus on big cost cuts and shrinking the group’s unprofitable investment bank.
Moody’s said its downgrade reflected the challenges Credit Suisse faced in turning round its investment bank during a difficult economic environment and the problems the new management team will face changing the bank’s culture.
Eoin Mullany, analyst at Berenberg, cut his share price target on Credit Suisse from CHF8 to CHF7 and said: “With sticky near-term costs and revenues under increasing pressure, it is hard to be positive on Credit Suisse.”
Credit Suisse shares were down 6.6% to CHF5.18. The shares hit a record low of CHF5 in mid July.