Investors balk at bad news

INVESTORS didn’t like the bevy of bad news from Credit Suisse. Lower profits – and lower expectations in the medium term – were compounded by a bigger-than-expected drop in the dividend. Shares lost almost six per cent yesterday to close down at SwFr42.10 (£27).

Chief executive Brady Dougan will likely be miffed. In many ways, he has steered the bank through the crisis remarkably well, especially compared to closest rival UBS (which had to contend with the highly-damaging US tax agreement). Credit Suisse pulled in net new assets of SwFr68bn over the year, compared to an annual net outflow of SwFr14.3bn for UBS.

So why did investors walk? Firstly, the dividend cut of more than a third was too steep for some. In a way, Credit Suisse has over-promised and under-delivered. It has repeatedly told shareholders that their returns wouldn’t be hurt by Switzerland’s famously tough capital requirements. But with mid-term profitability expectations downgraded and lower dividends, that isn’t the case.

UBS, although in a worse shape, has been incredibly cautious, denying investors even the prospect of a dividend for several years.

Still, yesterday’s sell-off was likely over-done, providing a buying opportunity for others.