Credit Suisse Unveils Impressive Capital Deployment Plans

At its investor day 2018 held on Dec 12, Credit Suisse (SIX:CSGN) (NYSE:CS) announced some impressive capital deployment plans. The company plans to distribute about 50% of its bottom line earned in 2019 and 2020. These plans are backed by its successful three-year restructuring program, which is almost at the end.

For 2019, board of directors at Credit Suisse approved a share buyback program of at least CHF1.5 billion. At present, the company expects to repurchase at least CHF1 billion, subject to market and economic conditions. For 2020, Credit Suisse expects to announce a similar share buyback program.

Further, it seeks to increase ordinary dividend by at least 5% every year beginning 2019.

Also, the company informed its shareholders that dividend for the financial year 2018 will be proposed at the Annual General Meeting to be held in April 2019.

The company considers its three-year restructuring plan to be the driving factor behind the distribution. Notably, it revealed that it expects to achieve CHF4.3 billion in net savings since the end of 2015, more than CHF4.2 billion target it had set three years ago.

Tidjane Thiam, CEO of Credit Suisse remarked that the company has become “resilient in the face of market turbulence” because of strategic actions like reallocating capital toward a more stable division.

“We are confident that going forward, growth in Wealth Management, primarily through more stable revenue sources of net interest income and recurring fees, will allow us to continue to drive Group returns higher.” he said.

Deutsche Bank (NYSE:DB) is another bank that had unveiled its buyback plans of senior non-preferred bonds worth $1 billion in late November 2018. The buyback includes two long-dated securities maturing in March 2025 and January 2028, with a coupon rate of 1.125% and 1.75%, respectively. Notably, the bonds were trading nearly 92 cents and 88 cents on the euro.

With growing profitability and strengthening of key operations, Credit Suisse seems on track to improve the overall financial health. Also, these capital deployment plans will help boost investors’ confidence in the stock.

However, ongoing concerns over trade war and other global concerns led to a 27% fall in shares of Credit Suisse over the past six months compared with 8.6% decline of the industry.

Currently, the stock carries a Zacks Rank #4 (Sell).

A couple of better-ranked stocks in the finance space are KKR & Co. L.P. (NYSE:KKR) and TD Ameritrade Holding Corporation (NASDAQ:AMTD) , carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

KKR & Co.’s Zacks Consensus Estimate for fiscal 2018 earnings has moved 10.5% north in the past 60 days. Also, share price of the company has increased 24.8% in past two years.

TD Ameritrade Zacks Consensus Estimate for current-year earnings has been revised 2.6% upward over the past 60 days. Also, the company’s shares have risen nearly 10% in the past two years.

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