Credit Suisse Group (CS ) (CS) is the No. 2 bank in Switzerland and a biggie in global finance. But to the smart-money crowd, it is one of the most undervalued wealth-management plays. Some 40% of its profit comes from asset

management, and its business is enjoying double-digit annual growth. Most asset management outfits trade at 17 to 20 times earnings. "CS is way undervalued on that basis alone," says John Maloney, president of M&R Capital Management, which owns shares. CS stock, up from 68 in January to 75.04 now, trades at only 13.3 times his estimated 2007 earnings of $5.60 a share, and 11.9 times the 2008 estimate of $6.30. If CS were valued just as an asset manager, it would command a price of 133 in two to three years, he says. "Asset management is a fast-growing field," adds Maloney, "thanks to increased wealth concentration among baby boomers." And CS will gain, too, from new fortunes in Asia and Latin America. Over three to five years, Maloney sees even wider margins for CS in asset management and investment banking. A new CEO, Brady Dougan, replaces Oswald Gruebel in May, and Maloney expects he'll cut costs, improving margins further. Jeremy Sigee of Citigroup (C ) (it has done banking for CS), who rates CS a buy, says the company trades at a discount to its sum-of-the-parts value. He has a 12-month price target of 95.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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