Why Credit Suisse (CS) Stock Is Lower Today

NEW YORK (TheStreet) -- Shares of Credit Suisse Group (CS) are down 0.33% to $27.21 after it was reported that the bank is under fire from U.S. regulators over concerns it isn't heeding warnings to stop making loans regulators see as risky, sources told the Wall Street Journal.

The Swiss bank in recent weeks received a letter from the Federal Reserve demanding the bank immediately address problems with its underwriting and sale of leveraged loans, or high-interest-rate loans used by private-equity firms and others to finance purchases of companies, among other uses, the Journal said.

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TheStreet Ratings team rates CREDIT SUISSE GROUP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CREDIT SUISSE GROUP (CS) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 171.3% when compared to the same quarter one year ago, falling from $1,111.63 million to -$792.42 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market, CREDIT SUISSE GROUP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$5,746.37 million or 126.06% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The share price of CREDIT SUISSE GROUP has not done very well: it is down 12.25% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • CS, with its decline in revenue, slightly underperformed the industry average of 2.5%. Since the same quarter one year prior, revenues slightly dropped by 4.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share. 
  • You can view the full analysis from the report here: CS Ratings Report
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