Credit Suisse: Bove Downgrades as Dark Clouds Gather

Credit Suisse (CS) is “in the wrong place at the wrong time”, veteran analyst Richard Bove wrote in a note today downgrading the shares to Neutral from Buy.

Bove, of Rochdale Partners, sees five problems facing Credit Suisse:

The bank is integrating the formerly private bank Clariden Leu, which is resulting in layoffs.

The bank is working to resolve a conflict with the IRS over an inquiry into whether Credit Suisse helped Americans evade taxes.

Moody’s is considering whether to downgrade the bank’s credit rating.

The bank needs to rebuild capital to comply with new Basel III rules.

The European debt crisis threatens to engulf the bank.

The last point is the most important one, Bove argues.

“Switzerland is not a European Union member and it has its own currency. Plus, its government is not thought to have any sovereign debt issues. This would suggest that the country and its banks could benefit from the crisis. Unfortunately, the country�s stronger financial condition has resulted in a flow of funds into its currency. The rise in the value of the currency is inhibiting the growth of exports. This weakening is being exacerbated by the weakening of the European economies. Thus, Credit Suisse is in the wrong place at the wrong time.”

Bove has been overly optimistic on the bank for the past few months; as recently as late July, his price target on the shares was over $50. Credit Suisse closed today at $23.42.