Credit Suisse: “We have no liquidity problems”. Excusatio non petita ..
FILE PHOTO: The logo of Swiss bank Credit Suisse is seen at its headquarters in Zurich, Switzerland March 24, 2021. REUTERS / Arnd Wiegmann // File Photo / File Photo
The Latins, a wise people, said “Excusatio non petita, accusatio manifesta” “an unsolicited apology is equivalent to an open accusation”, and this is also true today and for finance.
For the second consecutive week, Credit Suisse's new CEO, Ulrich Koerner, tried to reassure investors (and indeed all players in the global market) that the troubled Swiss bank is “safe”.
While admitting there is a lot of uncertainty and speculation both inside and outside the bank, the CEO confirmed that the bank is in a "critical moment" as it prepares for its latest review. Koerner told employees not to confuse the stock's “daily” performance with the Swiss company's “strong capital base and liquidity position”. Because the stock has lost 20% in one month …
The market – in short – does not believe him, as credit markets are considering the possibility of default at the highest level since the peak of the Great Financial Crisis, as shown by the CDS, the insurance on the bankruptcy of securities.
And it appears that the counterparties to the bank's derivative transactions are aggressively hedging their exposure to the possible bankruptcy of the Swiss bank …
The bank – which in recent years has been hit by a corporate espionage scandal, a record loss in trading, the closure of investment funds and a flood of lawsuits – is expected to announce a major new strategic plan on October 27 and, as we recently noted, he stated that reports of a separate “bad bank” to contain its high-risk (read low-quality) assets are “categorically false”.
In August, Deutsche Bank analysts predicted that the downsizing of the investment bank and the growth of other business lines and capital strengthening would leave a $ 4 billion hole in the group's capital position. A 40% cut compared to current capitalization values.
"The reduction of other parts of the investment bank and the sale of smaller assets between the various divisions could help over time, but would probably come too late to avoid a capital increase," wrote Deutsche analysts Benjamin Goy and Sharath. Kumar Ramanathan.
As Bloomberg reports, Credit Suisse's market capitalization has dropped to around 10 billion Swiss francs ($ 10.1 billion), which means that any sale of shares would be highly dilutive for long-time holders.
The market value was over 30 billion francs until March 2021.
Credit Suisse executives noted that the company's CET1 capital ratio, which stood at 13.5% as of June 30, was in the middle of the expected range of 13% to 14% for 2022.
The company's annual report for 2021 stated that the minimum international regulatory ratio was 8%, while the Swiss authorities required a higher level of around 10%. So CS has a "strong capital base and liquidity position"? Like the news that "Bear Stearns was not in trouble", "Lehman is well capitalized" and "the subprimes were contained"?
If the bank does not find a way to be able to improve its stock market price, there is the risk that it will follow these not exactly exemplary examples. A disaster for the Swiss banking system, and beyond.
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Credit Suisse article: “We have no liquidity problems”. Excusatio non petita .. comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/credit-suisse-non-abbiamo-problemi-di-liquidita-excusatio-non-petita/ on Mon, 03 Oct 2022 06:00:39 +0000.