It’s sad to see how Credit Suissewhere I worked for 5 years, from 2008 to 2013, the bank that joined JP Morgan was the clear winner of the Great Financial Crisis, ends up in ruins, auctioned off and probably, absorbed by his archrival, UBS, the one that in 2009 begged him to free him from all his miseries. Since then I think Credit Suisse has been able to be in on every single financial scandal of the last decade.
in his day we competed to be the bestsince I left all my sources pointed to various reasons for the chaotic situation: a non-existent corporate culture, a changing management team and a strategy that was impossible to understand, since every three months was different from the previous one, all this has brought the ancient Swiss giant to its knees. But the biggest problem is that it has brought the entire European and probably world financial system to its knees in the process.
Last week we analyzed the falls of SVB and Silvergate and we highlighted the need for a purchase by one of the Big 4 and the immediate confirmation of the deposit guarantee by the Federal Reserve. The risk was that the American regional banks would start to fail like dominoes because the market assumed that there was something more serious than what was obvious.
Unfortunately, the Fed came up with a solution, but the big guys stayed out of it. They would help, but shopping nothing at all… Result? American regional banks fell 30% on Monday, Credit Suisse 20% and European banks left more than 5% in their first weekly session. From now on all the measures announced have been insufficient although, thank God, we have reached Friday without a stock market crash whose shadow is projected about markets that are crying out for an expeditious solution that neutralizes the risk of catastrophe.
Thursday the ECB announced that it did not foresee contagion to the rest of the system and the Central Bank of Switzerland gave a line of billions to Credit Suisse. The joy lasted for the European financial system for approximately two hours and the sector ended up falling more than 3% in the day and some values 17% in the week. While American 2 and 10 year olds moved 20 points up or down every day, leaving “the world hedge fund full of corpses.
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The most critical will tell me that this is nothing, that the rates had gone up a lot, that nothing needs to be done because they have gone down. While all of these arguments are valid, the problem is not that the rates have gone down, but how and why they have done it: there is a crisis of trust and without trust there is no paradise, paraphrasing the well-known soap opera.
Don’t laugh at it, to show a button: you know, from previous situations, that one of my specialties is dividends. It is a relatively simple operation in which you buy or sell a futures contract on the dividend that you think a company will pay in a given period. This week the Dividend Bank Index as of June 2023 (dbem3) was trading 4.70 vs. 5.18 last week; just over 10% drop. Although this should not be something flashy, it is the fact that all the dividends until June have already been announced and add up to 5.18… In summary, people are selling already announced dividendsalthough not paid, the day after the European Central Bank says that there is no risk of contagion in European banks.
The only way these dividends won’t be paid is for the ECB to forbid banks from doing so and how do you think their credibility would look after your comments this week? The other possibility, which is not entirely remote, is a Great Financial Crisis., but banks would cut future dividends, not dividends already announced. Buying these dividends, I insist, already announced, provides a return of 10% in 3 months (until June 16), that is, more than 40% annualized. Crazy!
Just seconds ago when I was about to send this article, I have been confirmed that UBS will stay with Credit Suisse
But there is still more. This instrument normally processes 250/500 contracts per day. About 15,000 were operated on Friday. If you do not believe that the world “will end tomorrow” buy some DBEM3 (European Bank Dividends due in June 2023), it will pay you vacations.
Today we are going to do it, as the English say, sweet and short, since the truth is that I am exhausted from the week and if a corporate operation is not announced at Credit Suisse and First Republican Bank The next one won’t be much better.I’m afraid.
Just seconds ago when I was about to send this article, I have been confirmed that UBS will stay with Credit Suisse. The books of one of the fixed income traders I know have been put into the Virtual Data Room, or a term used among specialists to confirm that the auction is over, and the positions are being absorbed and analyzed one by one.
No bank can survive the loss of trust of its depositors and if we all want our deposits back at the same time…
It seems that a spin off of Swiss Banking, while UBS takes the parts of the business that it really wants, multiple concessions from the regulator that You want to make sure that on Monday at the opening there are no loose wireswe hope that the Americans follow the same path.
remember, no bank in the world can survive the loss of confidence of its depositors and if we all want our deposits back at the same time… Without Trust there is no paradise.
It’s sad to see how Credit Suissewhere I worked for 5 years, from 2008 to 2013, the bank that joined JP Morgan was the clear winner of the Great Financial Crisis, ends up in ruins, auctioned off and probably, absorbed by his archrival, UBS, the one that in 2009 begged him to free him from all his miseries. Since then I think Credit Suisse has been able to be in on every single financial scandal of the last decade.
