Oh ma gli svizzeri tuttappost? 
Rumors of a major bank going bust...
Media isn't saying who, but it's well-known. Here's what's up.
Word on the street has it that a "major international investment bank" is about to turn insolvent.
There's a funny stigma in media around naming names, but of course the rumors are about Credit Suisse (CS).
A leaked internal memo shows CEO Ulrich Koerner conceding that the bank is indeed at a "critical moment."
In his note, Koerner also chastises employees for worrying:
"I trust that you are not confusing our day-to-day stock price performance with the strong capital base and liquidity of the bank."
Uhm, ok... That's one way of putting it, now that CS is on the brink of becoming a penny stock, down another 10% this morning.
Over the last 15 years, CS shares have fallen by 95% in what can only be described as a total demolition of shareholder value.
Investors may as well have soaked their money in kerosene, stuffed it in oil drums, and lit that sucker up.
But never mind the shameful track record... CS is now allegedly in private talks, begging for capital.
To be fair, the balance sheet looks ok with a LCR of 203% and CET1 of 13.5%. But anyone familiar knows this is a joke.
That's because the balance sheet isn't the problem here...
As always, it's what's OFF-balance sheet that counts.
Through its investment bank, CS has $860 billion in levered exposure - only 1% of which need blow up to wipe out their entire market cap.
Sound farfetched? Not really...
After all, none of their recent and humiliating blowups were visible from the balance sheet either.
These included Archegos, Greensill, and Credito Real, which cost the bank a combined $7.3 billion.
Where in the balance sheet did CS mention those risks at the time?
Oh that's right, they didn't.
That's because there's only so much you can tell from public financials... Lehman famously announced just a week before its collapse:
"Our capital position at the moment is strong."
What's more, CS seems to know this.
As of last week, board chair Axel Lehmann (oh god, that's really his name) is thinking about splitting the bank in three parts, one of which would be a "bad bank" to house toxic assets.
Regardless, the market has clearly come to its own conclusion.
CDS spreads on CS, a measure of default risk, are now at 2008 levels.
But weren't banks supposed to be healthier and better capitalized after the Global Financial Crisis?
Guess again.
The bailouts only got the financial system more hooked on free money and cheap rates.
And now that central banks are RAISING rates, things are falling apart.
Yields going to 5% on the GB30Y last week already broke UK pensions funds.
It will be interesting to see at which rates the first major bank fails.
What started as an inflation crisis is now looking like a credit (Suisse) crisis.
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Topic: Crisi Economica [CORONAVIRUS EDITION] (Letto 351933 volte)