The big news out of the financial sector over the weekend concerned investment bank Credit Suisse (NYSE: CS) and its financial health. Shares of the bank dipped to a new all-time low Monday morning before rebounding slightly, but many investors and analysts are deeply concerned about the Switzerland-based bank's future.

Here's a rundown of what happened, why investors are so concerned, and whether Credit Suisse is a bargain stock to consider for your portfolio.

Is Credit Suisse in trouble?

The short answer is that we don't know for sure. The Financial Times reported that Credit Suisse was in discussions with investors to reassure them of the bank's financial health. It was also reported that CEO Ulrich Korner sent a memo indicating that the bank is looking to raise capital. And without getting too deep into a discussion of derivatives, the bank's credit default swaps -- basically insurance against the bank defaulting on its debt -- saw costs rise sharply, essentially indicating that investor confidence in the bank's financial health was eroding.  

Now, the bank's management denies any major problems. In a note to CNBC, Korner spoke of the bank's strong capital base and liquidity position. And separately, he denied reports that the bank needs to raise capital but did confirm that Credit Suisse is completing a strategic review. In fact, in his memo to staff, Korner said the bank was at a "critical moment" and would present its strategy update plans on Oct. 27. Analysts have speculated that the bank could sell some of its assets, and could potentially exit some of its markets, including the United States.        

Why is the market worried?

The 2007-2009 financial crisis still leaps to investors' minds when markets get turbulent. And the collapse of a major financial institution would trigger a wave of panic in the markets that another crisis is beginning.

Credit Suisse is a massive investment bank, with about $1.5 trillion under management and operations all over the world. To put this into perspective, Lehman Brothers -- whose 2008 bankruptcy was a key event in the financial crisis -- had less than $250 billion in assets under management (AUM) at the time of its collapse.

Still, analysts generally don't see a worst-case scenario playing out here. A report by Citigroup analysts called the situation "night and day from 2007." JPMorgan Chase called Credit Suisse's capital position "healthy." 

Is Credit Suisse stock cheap now?

Credit Suisse is down by roughly 60% over the past year, trading at an all-time low. Shares of the investment bank trade for just 21% of book value (that's not a typo). So, it may seem like a good time to buy the stock at a bargain.

However, keep in mind that there are significant risks to doing so. As mentioned, some experts think there's a serious chance that Credit Suisse could collapse. And even though many think there's a very low probability of that happening, there are plenty of bank stocks trading cheaply that aren't having financial problems. For example, if you're looking for an investment bank, Goldman Sachs is trading for less than its book value for the first time since the initial 2020 COVID-19 crash and is in solid financial shape.

There are other examples for sure, but the point is that it's important to be able to distinguish between stocks that are cheap and stocks that are cheap for a reason. While a full collapse seems unlikely, Credit Suisse is definitely in the latter category.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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FY21 trading update

The trading update highlights an 8.4% increase in group same store sales growth in the first 17 weeks of FY21.

Group CEO and managing director, Don Meij said that sales growth across the group was "now more normalised than at the initial peaks, in all regions above our medium term outlook". Mr Meij pointed to Germany and Japan as outperforming regions given local coronavirus conditions and the assertive actions of management. 

During this period, the business also recorded 74 new store openings, a record for this time of the year, and reflecting the high level of appetite in its franchised and corporate business to meet customer demand. 

Despite short-term uncertainty and challenges, the business remains confident in its medium-long term outlook. Domino's 3-5 year outlook targets annual same store sales growth between 3-6% and annual organic new store additions of between 7-9%. Given its ongoing strong performance, the company expects to see a record number of new stores open in FY21. 

Cautious broker updates for the Domino's share price 

Big brokers updated their Domino's share price targets last Friday with a largely neutral to negative tone. Domino's trades at a price-to-earnings (P/E) ratio of almost 50. This compares to similar food businesses such as Collins Food Ltd (ASX: CKF) that trades at half that valuation.

Macquarie Group Ltd (ASX: MQG) raised its Domino's share price target from $77.30 to $84.30 and retains a neutral rating. It notes that first quarter sales were ahead of expectations. However, new store openings was a disappointment but not surprising given the state of the pandemic outside Australia. 

UBS Group AG (NYSE: UBS) also raised its Domino's share price target from $70.00 to $72.00 and retains a sell rating. Sales during the first quarter were in-line with expectations but it expects lower sales growth to reflect the ongoing impact of the pandemic in other regions. The price target increase was given to reflect its performance so far. 

Credit Suisse Group AG (NYSE: CS) was the only broker to lower its Domino's share price target from $61.32 to $58.71 with an underperform rating. After reviewing the first quarter trading update, it notes slowing sales growth and expects the pandemic to continue to impact the business ex-Australia. 

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The Australian believes the scale of the deal is $6.4 billion with an indicative share price of $1.85. 

Anatomy of the AMP takeover

Many of the chief players in this drama are part of a small circle. Ares Management has hired the ex-Credit Suisse Group (NYSE: CS) chief to run its Australian operations. Credit Suisse represents AMP along with Goldman Sachs Group Inc (NYSE: GS). Moreover, ex-CEO, now head of AMP Capital, Francesco de Ferrari, is also an ex-executive director of Credit Suisse. Additionally, The Australian has revealed that Ares Management is looking for space in Chifley Tower, near the AMP headquarters.

However, it is the final paragraph of the AMP statement that raises questions.

…AMP has received significant interest in its assets and businesses and is assessing a range of options in a considered and holistic manner, including continuing to pursue its three-year transformation strategy, with a focus on maximising shareholder value.

As the report in The Australian went on to point out, there is a chance that AMP will stay in one piece. Furthermore, the ability for it to sell off specific businesses, or embrace a total break up cannot be ruled out. While we do know that Ares Management is in the data room for due diligence purposes, we do not know if there is anybody else there. Nor do we know exactly what they are reviewing.

Since the moment AMP announced a company review, there have been suitors for its AMP Capital business. These have included market players like Macquarie Group Ltd (ASX: MQG), US equity fund KKR & Co Inc (NYSE: KKR), DEXUS Property Group (ASX: DXS), and Vicinity Centres (ASX: VCX). Even Magellan Financial Group Ltd (ASX: MFG) was mentioned as a potentially interested party.

Foolish takeaway

With the first non-binding bid now out in the open, this drama has definitely moved beyond the opening act. However, from the wording on the statement, it is clear that it is still far from over. Today, the AMP share price is trading at $1.54. Yet five years ago it was trading at $5.73 for virtually the same company, except without its life insurance business, something opposed by key institutional shareholders.

However, there has also been a lot of bad road travelled since then. The Hayne Royal Commission, underperformance, sexual harassment scandals, disarray in leadership, a revolving door on the chair position. The list goes on and has, understandably, been reflected in the falling AMP share price. While the company still may go ahead under its own steam, there is a chance that this is the final act. If so, then the board is duty bound to try to achieve the greatest value for shareholders, whether this involves a sale or breakup.

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