Bill Nygren's Oakmark Comments on Credit Suisse
Credit Suisse (NYSE:CS) was one of the worst performers for the quarter due to a weaker investment banking environment and because of negative comments about Credit Suisse in the Swiss National Bank’s (SNB) recent annual Financial Stability report. The SNB indicated that, in order to meet the Basel 3 requirements, Credit Suisse should stop its dividend payments and/or issue equity to more rapidly increase the company’s loss-absorbing capital. We found these comments odd since the SNB is not Credit Suisse’s regulator. FINMA (Credit Suisse’s regulator) is satisfied with Credit Suisse’s financial health. Additionally, Credit Suisse has until 2019 to meet Basel 3 requirements, and the head of the SNB even stated that “Credit Suisse’s plan corresponds to our assessment, but we’d like to see acceleration.” We forecast that Credit Suisse will meet Basel 3 requirements well before 2019. We already know that the Basel 3 requirements for Swiss financial institutions are some of the most stringent in the world, another example of Swiss governmental agencies’ extreme conservatism. We take capital strength and solvency very seriously, as it helps protect downside risk when investing. With little exposure to sovereign debt, excellent liquidity and a strong balance sheet that is growing stronger, Credit Suisse’s financial strength satisfies our investment criteria.