Credit Suisse Should Rebound Once Overhaul Complete, Herro Says

  • Bank should trade for at least 1.5 times book value: Herro
  • David Herro was speaking in interview with Bloomberg Radio

A sign stands illuminated on the side of a Credit Suisse AG office in Zurich.

Photographer: Luke MacGregor/Bloomberg

Credit Suisse Group AG shares should rebound once Chief Executive Officer Tidjane Thiam completes a restructuring that’s shifting the Swiss lender toward wealth management, said David Herro of Harris Associates, one of the bank’s biggest shareholders.

“If they do this transformation right, this is a business that should trade for at least 1.5 times book value,” Herro told Tom Keene and Francine Lacqua in an interview on Bloomberg Radio on Monday. “If they can follow through the execution of this plan, it’s got a lot more upside.”

Since taking over as CEO in July 2015, Thiam has announced two restructuring plans, eliminating thousands of jobs and risky trading positions, to shift away from securities trading. While the bank ended six months of losses, returning to a profit in the second quarter, the shares extended declines, eroding about half the market value this year.

The decline in shares leaves the bank with a market valuation that reflects a price to book ratio of about 54 percent, indicating that it’s worth less than investors would expect to receive if the firm liquidated its assets. Deutsche Bank AG, which is also overhauling its businesses, trades at about 26 percent.