(Reuters) - Swiss banks are likely to be under pressure to downsize or restructure their investment banking divisions further, ING said and started coverage of Credit Suisse Group AG CSGN.VX, UBS AG UBSN.VX and Julius Baer Gruppe AG BAER.VX.
The brokerage said it prefers UBS, which is geared more towards growth areas, over Credit Suisse. It started UBS with a “hold” rating and Credit Suisse with a “sell.”
Baer is a long-term “winner” in private banking, ING analysts wrote in a note and started the bank with a “buy.”
Swiss banks have been shrinking their balance sheets to help meet Switzerland’s tough new capital rules designed to make the country’s banks more robust after the financial crisis.
“We view UBS as the most comfortable on capital ... above our preferred level for global investment banks,” analysts led by Albert Ploegh said. They started the stock with a price target of 11.6 Swiss francs.
Credit Suisse showed lower capital levels against peers. ING analysts it will likely remain below investor expectations in fiscal 2013, despite topping regulatory requirements.
“We identify scope to disappoint at Credit Suisse given that its plan already includes several dilutive measures, which are also reliant on the bank’s future earnings generation,” the analysts said.
With a target price of 15.1 Swiss francs on Credit Suisse, the analysts expect a fall of 13 percent from the stock’s Friday close.
ING said it saw Baer as a separate case as it was not subject to the Swiss too-big-to-fail capital requirements, and, therefore, did not need to issue buffer capital. The brokerage set a price target of 39.3 Swiss francs on the stock.
“In our view, Baer shows the most growth potential thanks to its appealing gearing towards growth markets, recent hiring of wealth managers to reach full potential in the mid-term and impressive asset gathering,” ING said.
Shares of UBS and Credit Suisse rose almost 2 percent to 11.27 Swiss francs and 17.57 Swiss francs respectively by 0830 GMT. Julius Baer stock rose almost 1 percent to 34.52 Swiss francs.
Reporting by Sagarika Jaisinghani in Bangalore; Editing by Joyjeet Das