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Credit Suisse (CS) Settles Three Lawsuits Over XIV Notes

Zacks Equity Research

Per a Reuters article, Credit Suisse CS was able to put behind three pending lawsuits that charged it of having mislead investors regarding a complex product — VelocityShares Daily Inverse VIX Short-Term Exchange-Traded Notes (XIV Notes).

XIV Notes — a popular product offered by the bank — were linked to expectations of future price swings. The notes were designed to produce opposite returns of Cboe Volatility Index, thus these sank more than 90% following a market selloff in February 2018, post which Credit Suisse took the product off market.

Investors filed a lawsuit against the bank stating that it manipulated the notes by liquidating its holdings in various financial products to avoid a loss. It also said the company’s statements about the product to investors were incomplete.

The U.S. District judge dismissed the cases stating the company had sufficiently warned investors about the downsides involved in these notes. Also, it was ruled that Credit Suisse’s move to purchase a huge bunch of futures contracts was backed by no wrong intentions, rather to take advantage of favorable market conditions.

Our Take

Credit Suisse remains involved in a number of regulatory and legal proceedings. In its latest quarterly filing, the company estimated that the aggregate range of loss not covered by existing litigation provisions could go as high as CHF 1.4 billion.

Nevertheless, Credit Suisse is well poised to reap benefits from the three-year restructuring overhaul it successfully completed in 2018. Also, it continues to bolster its wealth management business by expanding presence.

The stock has gained 12.2% over the past six months against 0.7% decline recorded by the industry it belongs to.

Currently, it flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

BNP Paribas SA BNPQY has been witnessing upward estimate revisions for the past 60 days. Moreover, this Zacks #2 Ranked (Buy) stock has rallied 6.2% year to date.

Sumitomo Mitsui Financial Group SMFG has been witnessing upward estimate revisions for the past 60 days. Also, the company’s shares have gained 8.6%, year to date. At present, it carries a Zacks Rank of 2.

The Toronto Dominion Bank TD has been witnessing upward estimate revisions for the past 60 days. Additionally, the stock has rallied around 15% year to date. It currently holds a Zacks Rank #2.

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