Credit Suisse (CS) Stock Down Today as It Prepares to Fight NY Mortgage Securities Case

NEW YORK (TheStreet) -- Shares of Credit Suisse Group (CS) are down 1.81% to $25.50 in pre-market trade after it was reported that it said today that it would fight a U.S. lawsuit which accuses the Swiss bank of deceiving investors in mortgage-backed securities it had issued, Reuters reports

The Zurich-based bank said a New York State Supreme Court justice had last week rejected its request to dismiss the case, in which New York Attorney General Schneiderman accuses the bank of misrepresenting the quality of loans underlying residential mortgage-backed securities sponsored and underwritten by Credit Suisse in 2006 and 2007, Reuters said.

Investors suffered $11.2 billion in losses on the securities, according to Schneiderman's lawsuit, which stems from a joint federal-state working group created by President Obama to go after wrongdoing that led to the 2008 financial crisis.

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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 multiple weaknesses, 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 generally disappointing historical performance in the stock itself, disappointing return on equity and weak operating cash flow."

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

  • CS has underperformed the S&P 500 Index, declining 14.67% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • 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 $4,028.71 million or 66.06% when compared to the same quarter last year. Despite a decrease in cash flow of 66.06%, CREDIT SUISSE GROUP is still significantly exceeding the industry average of -187.98%.
  • CS, with its decline in revenue, underperformed when compared the industry average of 1.4%. Since the same quarter one year prior, revenues fell by 21.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 42.56% is the gross profit margin for CREDIT SUISSE GROUP which we consider to be strong. Regardless of CS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.54% trails the industry average.
  • You can view the full analysis from the report here: CS Ratings Report
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