Company turnarounds can be very rewarding for investors, but they need perfect timing or nerves of steel to ride out the early bumps.

Credit Suisse

CS -3.35%

seems intent on testing its shareholders’ mettle.

On Tuesday, the beleaguered Swiss lender warned that additional litigation provisions and more subdued trading meant it only broke even in the quarter through December, excluding an already announced goodwill write-down of 1.6 billion Swiss francs, equivalent to $1.75 billion. The most worrying news was that its international wealth management business—its strategic focus and crown jewel—had net asset outflows in the period.

The profit warning is another unwelcome surprise, just eight days after the bank unexpectedly replaced turnaround specialist

António Horta-Osório

as chairman. The stock fell roughly 2% in morning trading Tuesday even as other bank shares rose.

The case for investing in Credit Suisse is that it looks much more like its better-valued crosstown rival


than like most of its European peers. It has an established wealth management business with a footprint in burgeoning Asian markets, asset management and investment banking to service its wealthy clients, and a solid Swiss bank to boot. Meanwhile, the stock trades at less than half book value following a string of scandals.

Credit Suisse already has a plan to fix its problems: In November, the bank outlined how it will improve risk management and cut overall risk while maintaining its entrepreneurial spirit. But it is a tricky balancing act and, for outsiders, progress is difficult to gauge. Some think a more dramatic overhaul is required. This month’s unwelcome surprises won’t help rebuild trust, even if they aren’t on the scale of last year’s Greensill and Archegos affairs.

Above all, the company needs a good captain to set and keep its course. Its relatively unknown new leaders can’t be held responsible for a poor quarter—Mr. Horta-Osório was regarded as a very hands-on manager—but they still need to prove they are up to the task. Effectively managing the external report into the Greensill case would be a good place to start.

For now, most investors seem willing to give Credit Suisse’s new bosses the benefit of the doubt. They need to take full advantage.

Write to Rochelle Toplensky at

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