Credit Suisse stock rude wake-up call as challenges remain

Credit Suisse (NYSE: CS) stock price remains under intense pressure amid wealth management outflows and a lack of investor confidence. Harris Associates, one of the biggest investors, sold its stake in the company. The CS stock was trading at $3.03 on Friday, close to its lowest level on record.

Credit Suisse loses key investor

Credit Suisse has been dead money for investors in the past decade. The stock has plunged by over 95% from its highest point in 2007. In the same period, many European banks, including UBS and Julius Baer, have erased most of their financial crisis losses. 

In a remarkable twist, Credit Suisse is now smaller than Julius Baer in terms of market cap. There are also signs that Julius Baer, which is little known outside of Switzerland, has attracted some inflows from Credit Suisse’s clients. Credit Suisse lost over $118 billion of customer funds in Q4 as concerns about its going concerns remained.

The latest blow for Credit Suisse is news that Harris Associates has sold its entire stake in the company. This was a notable situation since the fund was the biggest shareholder in the company for many years. In a statement to the FT, the company cited the rising concerns about the future of its franchise and the fact that its European peers were doing much better as interest rates rise.

After Harris exit, Credit Suisse is now mostly owned by well-moneyed Middle Eastern companies. Saudi Arabia and Qatar are the biggest shareholders in the company. 

The past few days have been difficult for Credit Suisse. In London, a judge ordered that its Mozambique case be reopened, putting the firm into more risk. At the same time, the company is offering higher deposit rates in Asia to woo clients, which risks eroding its margin. Worse, Swiss regulators are investigating the company about comments by its chairman.

Credit Suisse stock price forecast

CS stock chart by TradingView

In my Credit Suisse vs UBS comparison article, I made the contrarian case for investing in the former as it implements a turnaround. This view was wrong as Credit Suisse stock price plunged to an all-time low. It remains below the 50-day moving average while the Relative Strength Index (RSI) has moved slightly below the neutral level of 50.

Therefore, the outlook of the stock is still bearish for now as investor confidence wanes. This view could see the shares plunge to $2.50.