Bloomberg News

Credit Suisse Price Target Raised by Morgan Stanley on Cost Cuts

September 17, 2012

Credit Suisse Group AG (CSGN) had its price target raised by Morgan Stanley analysts, who cited the second-biggest Swiss bank’s focus on cutting costs.

“We were struck by the change in narrative and gritty focus by Credit Suisse to re-engineer their cost base materially and reshape their model,” analysts Huw van Steenis and Hubert Lam said in a note today after a meeting with David Mathers, the bank’s chief financial officer. The analysts raised the price target for Credit Suisse shares to 24.5 francs from 22 francs, while maintaining an equal-weight recommendation.

Credit Suisse last year announced 3,500 job cuts to help it save about 2 billion francs ($2.16 billion) in annual costs and said in July it would pursue an additional reduction of 1 billion francs in costs by the end of 2013. The company will “continue to look for further cost reductions across the infrastructure of the bank,” beyond the announced targets, Mathers said at an investor presentation in New York last week.

“Stagnating revenue pools in the investment bank and wealth management is calling for a fundamental re-think on costs,” the Morgan Stanley analysts wrote, adding that Zurich- based Credit Suisse wants to shift to “continuous cost cutting.”

The stock rose 1.8 percent to 21.89 francs by 4:33 p.m. in Zurich trading, on course for the highest closing price since April. The shares are down less than 1 percent this year.

The bank plans to reduce costs in wealth management by 2 percent to 3 percent a year by reducing duplication and paring investments in markets with no growth prospects, the analysts said. Credit Suisse is about 50 percent to 60 percent through with cost-cutting in wealth management, they added.

At the investment bank, about 70 percent to 80 percent of the planned cost reductions are complete, the analysts said. The bank is trimming about 20 percent of staff in fixed income and in August eliminated about 30 percent of the European investment-banking division, which advises clients on mergers, acquisitions, stock and bond sales, the note said.

To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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