Avoid Credit Suisse stock: Buy Julius Baer instead
Credit Suisse (SWX:CSGN) stock price has been in the spotlight this week as it plunged to an all-time low. The stock remains deeply in the red even after the Swiss National Bank (SNB) announced plans to shore its liquidity. It was trading at SFR 2 on Friday, which was above this week’s low of SFR 1.60.
Credit Suisse bailout
As I wrote in this article, Credit Suisse stock price plunge on Wednesday after the Saudi National Bank (SNB) warned that it will not provide additional support to the company. This was an important event considering that most investors believed that the company would need more capital as it executes its turnaround strategy.
The SNB came to the rescue by providing the company with access to over $50 billion to implement its turnaround. At the same time, Swiss regulators are now working towards merging the bank with UBS, the biggest bank in the country. However, the two companies are resisting to merge, with UBS being focused on its wealth management business.
There are also concerns about capital flight from Credit Suisse and its future profitability. This explains why the stock is still struggling even after receiving bailout funds from the Swiss government. As such, the company will likely continue its volatility in the coming months.
Julius Baer is a better investment
During the collapse of Credit Suisse, most investors shifted their funds from the company to UBS, which is a better-managed company with a presence in its key markets like the United States and China. This explains why the company’s stock has jumped by almost 40% from the lowest level in 2022.
However, beneath the surface, I believe that Julius Baer is a better investment than Credit Suisse. For starters, Julius Baer (SWX: BAERE) is a Swiss banking group, with a market cap of more than $12 billion. Like UBS, the company provides wealth management, financing, and investing solutions, mostly to wealthy individuals.
In the past few months, clients moved their money from Credit Suisse to Julius Baer. The most recent financial results showed that its total client assets came in at CHF 491 billion. Julius Ber hopes that its assets will rise to 1 trillion francs by the end of this decade. Inflows increased in the second half of the year as Credit Suisse investors started exiting. The company said:
“Net inflows recovered meaningfully from around CHF1 billion net outflows in H1 to almost CHF10 billion net inflows in H2, of which close to CHF6 billion in the last 2 months for a full year net new money result of close to CHF9 billion.”
Therefore, there is a likelihood that Julius Baer will do well in the coming months, Most importantly, it has a strong balance sheet with a CET ratio of about 16%, which is much higher than that of most European banks.
Julius Baer stock has more room to run
The daily chart shows that the Julius Baer stock price was in a strong bullish trend before the current Credit Suisse crisis. This rally saw it jump to a high of 63.62 CHF. It formed a double-top pattern and plunged as other bank stocks retreated. It has now moved below the 25-day and 50-day moving averages.
While the stock is expected to have some volatility in the near term, I suspect that it will do well in the long term. If this happens, the stock will likely resume the bullish trend and retest the year-to-date high of 63.70 CHF.