UBS vs Credit Suisse: Which is the best Swiss bank stock to buy?
UBS (NYSE: UBS) and Credit Suisse (NYSE: CS) are the two best Swiss banking groups. In the past few years, the two companies have deviated as the latter has moved from one crisis to another. As a result, while the UBS stock price is sitting at its highest point since May 2008. Credit Suisse, on the other hand, is close to its all-time low, giving it a market cap of about $11 billion, making it smaller than Julius Baer.
Moving in diverging pathsCopy link to section
UBS and Credit Suisse have moved in diverging paths in the past few years. For its part, UBS has transitioned to become the biggest wealth management bank in the world. It is a premier institution whose revenue surged to over $34 billion in 2022 while its net profit jumped to over $7.6 billion.
Credit Suisse, on the other hand, stared death in 2022 as concerns about its liquidity rose. As a result, the company’s revenue came in at just $16 billion, down from the previous $20 billion. It then stumbled to its biggest loss since the Global Financial Crisis, as we wrote here. Unlike other banks, Credit Suisse has never recovered from the GFC crisis.
Credit Suisse crisis are well-known. The company suffered huge losses due to its exposure to Greensill Capital and Archegos. It was also forced to pay millions of dollars for its role in Mozambique tuna bonds. And this week, the company said that a rogue ex-employee made away with customer data. In all, many wealthy individuals have moved their funds from the bank.
Credit Suisse is trying to rebuild its business by raising capital. At the same time, the company is creating CS First Boston, which will become a small investment banking group. With global ambitions gone, the bank wants to focus on Swiss banking and the lucrative wealth management business.
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UBS vs Credit SuisseCopy link to section
At first glance, the answer of the best bank to invest in between Credit Suisse and UBS seems obvious. UBS, which has stayed away from trouble, seems like the be better buy here. Besides, it is a leading wealth manager with a good reputation and high profitability.
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Credit Suisse, on the other hand, is a scandal-prone bank that faces significant liquidity issues. However, I believe that Credit Suisse stock seems like a better contrarian buy at the current prices. If the bank can stay out of scandals, which I expect it to, then a turnaround is possible.
Credit Suisse is extremely cheap, as you would expect foe a company whose shares have tumbled by over 60%. It has a price-to-book of 0.18 compared to UBS 1.19. Also, the company’s price-to-sales metric of 0.53 is less than that of UBS, which stands at 2.06.
Most of Credit Suisse’s challenges are well known. For example, the company has already noted that it will report a big loss this year. As such, unless new news comes up, the company could start a turnaround in 2023.
This is not to say that UBS is a bad bank. Far from it, I believe that it is one of the best bank stocks to buy and hold for a long time. But in terms of potential returns, I expect that Credit Suisse stock will outperform from a low base.