The Facebook IPO no doubt cast a pall on the summer sunshine for senior Morgan Stanley executives. However, another bank that has had a torrid time recently is Credit Suisse. This is a little unexpected. The bank was a distinct winner from the 2008 crisis: it did not take government money and seemed to adapt quickly to the changing environment. However the share price performance in the past two years has been disastrous – it is down more than 60% since early August 2010 and now trades below its 2009 trough, close to a two-decade low. Other leading global banks have suffered, but not as much. Over the same period, JPMorgan’s share price is down by some 10% and HSBC shares are about 15% lower.
Credit Suisse’s earnings have been weak in the past two quarters, costs are too high, and now the bank is having problems with the Swiss authorities. In late June, the Swiss National Bank stated that Credit Suisse’s 5.9% core tier 1 ratio was inadequate to meet the more onerous Basle III standards. As if chief executive Brady Dougan didn’t have enough on his plate, Moody’s then downgraded the bank by three notches to A1.