What happened

Shares of several bank stocks struggled this week after reporting their third-quarter earnings results for the year.

As of market close Thursday, shares of the large Swiss bank Credit Suisse (CS) were down nearly 19% for the week, according to data provided by S&P Global Market Intelligence.

Meanwhile, shares of the Indiana-based Horizon Bancorp (HBNC 0.64%) traded 18.5% down, while shares of Dallas-based First Foundation (FFWM 2.81%) ended Thursday down 11.4%.

So what

Many banks have been reporting earnings over the last few weeks, but one of the bigger bank stories had to do with Credit Suisse, which, along with its earnings, provided investors with an update on its wide-scale restructuring plans.

Credit Suisse has really struggled in recent years as large scandals such as the bank's exposure to Archegos Capital and Greensill Capital have resulted in billions of losses and made investors question the bank's judgment. The bank currently trades at less than 23% of its tangible book value, or liquidation value, which is a rock-bottom price.

This morning, management, along with reporting a more than $4 billion loss in the third quarter, announced plans to radically restructure its investment bank. The markets business will be folded into the larger banking franchise and then the capital markets and advisory business will be put into its own unit called CS First Boston, which is the brand of a bank Credit Suisse acquired in 1990. Finally, there will be a capital release unit intended to help the bank exit certain businesses and significantly reduce exposure to securitized products.

Credit Suisse also plans to cut costs by about 15% between now and 2025 and raise $4 billion of fresh capital to help carry out the transformation, some of which will come from the Saudi National Bank.

Horizon reported diluted earnings per share of $0.55 on total revenue of more than $63.5 million, both numbers that missed earnings estimates. In the quarter, revenue from the bank's lending and securities business was not able to grow enough to offset higher funding costs, leading to margin compression. Expenses also rose in the quarter, although credit remained extraordinarily clean.

First Foundation, on the other hand, reported earnings that were in line with estimates, while revenue beat estimates. However, management is guiding for loan growth to be slower in the near term because the bank currently has more loans than deposits right now and deposits costs are likely to keep increasing given the high interest rate environment.

Now what

In general, I'm bullish on the banking sector long term. Banks are experiencing the fastest rising interest rate environment they've seen in quite a long time and have more capital and better liquidity than they have in the past.

There are near-term headwinds such as higher funding costs and deteriorating credit quality if we see a severe recession, but I think most banks are prepared to handle any coming storms in the future.

However, of this group, I'd stay away from Credit Suisse for the time being. It's trading at a beaten-down valuation so there could be upside if it executes this restructuring effort but there is a lot of work to do. I do not expect the market to be lenient if there are further hiccups and the capital raise is going to dilute existing shareholders.