Credit Suisse - Is it going to go bust, if so what happens?

[Adam.]

Kawasicki said:

Sorry if this is a stupid question... what happens if I buy a few shares in CS at the current extremely low share price?

If the bank goes pop, I lose my money. OK.

But I have the feeling that a lot will be done to avoid just that.

Why would it go pop? UBS are buying it and you would end up with UBS shares. In theory from today CS shares should move in lockstep with UBS at a ratio of 1:22

So consider whether the deal is good for UBS, opinions vary but I suspect LT it will be good

Edited by Adam. on Monday 20th March 10:15

[Digga]

untakenname said:

Just been reading up about AT1 bonds, surely with them now suddenly not being honoured it will cause the rest of the investors holding them in other banks look to try and redeem?

https://www.cityam.com/explainer-whats-an-at1-bond...

It's what seems to be happening already with Asian banks.

[pquinn]

Kawasicki said:

Sorry if this is a stupid question... what happens if I buy a few shares in CS at the current extremely low share price?

If the bank goes pop, I lose my money. OK.

But I have the feeling that a lot will be done to avoid just that.

That's a WallStreetBets level of degenerate investment ideas.

[Murph7355]

There were similar amusements in 2008...Northern Rock, Hbos, Lloyds...

Nothing was really learnt. Our whole system would have had to change.

[Gecko1978]

Digga said:

untakenname said:

Just been reading up about AT1 bonds, surely with them now suddenly not being honoured it will cause the rest of the investors holding them in other banks look to try and redeem?

https://www.cityam.com/explainer-whats-an-at1-bond...

It's what seems to be happening already with Asian banks.

I read the article but is there a market for these if you hold them at other banks can you sell them now it sort of seems like they are worthless given the action of the SNB

[isaldiri]

Adam. said:

What is surprising is they are getting anything, AT1 bondholders are supposedly higher up the pecking order but they are losing 100%

The swiss regulator has pulled a bit of a fast one - but crucially it's one they seem to be legally allowed to and so they did. The small print on the CS at1 bonds apparently said it can be written down to zero under certain conditions. One of the conditions is that the regulator determines that the writedown needs to happen.....

Interesting to speculate what might have happened if they were not outright writedown notes (which it seems all CS ones were) but bonds that were convertible into equity AT1s though as quite a lot of the AT1 market is....

[Digga]

Gecko1978 said:

Digga said:

untakenname said:

Just been reading up about AT1 bonds, surely with them now suddenly not being honoured it will cause the rest of the investors holding them in other banks look to try and redeem?

https://www.cityam.com/explainer-whats-an-at1-bond...

It's what seems to be happening already with Asian banks.

I read the article but is there a market for these if you hold them at other banks can you sell them now it sort of seems like they are worthless given the action of the SNB

Yes, it's thrown all of those into question and so I can't see there being a nice way out for CoCo holders.

[isaldiri]

Digga said:

Gecko1978 said:

Digga said:

untakenname said:

Just been reading up about AT1 bonds, surely with them now suddenly not being honoured it will cause the rest of the investors holding them in other banks look to try and redeem?

https://www.cityam.com/explainer-whats-an-at1-bond...

It's what seems to be happening already with Asian banks.

I read the article but is there a market for these if you hold them at other banks can you sell them now it sort of seems like they are worthless given the action of the SNB

Yes, it's thrown all of those into question and so I can't see there being a nice way out for CoCo holders.

It's a definite repricing required for the AT1s (or perhaps one could perhaps argue they were always mis-priced previously...) but it's a bit of an exaggeration to state as per prior post that the entire AT1 market is worthless I think.....

[Andy 308GTB]

Adam. said:

Gweeds said:

UBS down 9% on opening, and CS down 60% - I assume the CS shareholders will be taking this haircut?

UBS yes

CS shareholders are getting UBS shares (1 per 22 CS share) the equivalent 0.76CHF per share - so 60% less than Fridays close.

What is surprising is they are getting anything, AT1 bondholders are supposedly higher up the pecking order but they are losing 100%

Concern about this has been expressed by the ECB, the Single Resolution Board (whatever that is) and the European Banking Authority according to the FT. One way to trigger a run on Swiss Banks.

[Digga]

isaldiri said:

It's a definite repricing required for the AT1s (or perhaps one could perhaps argue they were always mis-priced previously...) but it's a bit of an exaggeration to state as per prior post that the entire AT1 market is worthless I think.....

Agree some will not raise concern, but it will ask questions of quite a few.

Andy 308GTB said:

Adam. said:

Gweeds said:

UBS down 9% on opening, and CS down 60% - I assume the CS shareholders will be taking this haircut?

UBS yes

CS shareholders are getting UBS shares (1 per 22 CS share) the equivalent 0.76CHF per share - so 60% less than Fridays close.

What is surprising is they are getting anything, AT1 bondholders are supposedly higher up the pecking order but they are losing 100%

Concern about this has been expressed by the ECB, the Single Resolution Board (whatever that is) and the European Banking Authority according to the FT. One way to trigger a run on Swiss Banks.

Swiss banks have been a thorn in the side of politicians and financial markets for years. They - ECB or Fed - will not do the Swiss any favours here.

Has to be said, as much as Switzerland is a global PITA with banks and CHF, we should not be too smug in UK, because the city and sterling are #2 on the hit list.

[KAgantua]

Digga said:

isaldiri said:

It's a definite repricing required for the AT1s (or perhaps one could perhaps argue they were always mis-priced previously...) but it's a bit of an exaggeration to state as per prior post that the entire AT1 market is worthless I think.....

Agree some will not raise concern, but it will ask questions of quite a few.

Andy 308GTB said:

Adam. said:

Gweeds said:

UBS down 9% on opening, and CS down 60% - I assume the CS shareholders will be taking this haircut?

UBS yes

CS shareholders are getting UBS shares (1 per 22 CS share) the equivalent 0.76CHF per share - so 60% less than Fridays close.

What is surprising is they are getting anything, AT1 bondholders are supposedly higher up the pecking order but they are losing 100%

Concern about this has been expressed by the ECB, the Single Resolution Board (whatever that is) and the European Banking Authority according to the FT. One way to trigger a run on Swiss Banks.

Swiss banks have been a thorn in the side of politicians and financial markets for years. They - ECB or Fed - will not do the Swiss any favours here.

Has to be said, as much as Switzerland is a global PITA with banks and CHF, we should not be too smug in UK, because the city and sterling are #2 on the hit list.

God yeah, the Oligarchs all have property/ cash here for a reason

[Carl_Manchester]

Kawasicki said:

Sorry if this is a stupid question... what happens if I buy a few shares in CS at the current extremely low share price?

If the bank goes pop, I lose my money. OK.

But I have the feeling that a lot will be done to avoid just that.

People like Paul Murphy (FT) thought this way in 2010 when he predicted Barclays would go back to £5 a share from peanuts but the truth is, the western economic and financial system is treading water.

the main issue is that most of these euro banks don't make any money or, if they do , they are stuffed to the gills with toxic management or, toxic investments.

if you buy anything in euro bank stocks , if you get anything better than break even you have won the competition.

look at the Barclays/Unicredit/Sabadell share price graphs, the list goes on.

apart from Unicredit the other one to watch is Man Group (MAN). apparently they fixed their trade algo years ago so it still makes a profit in a downturn. if it goes down through £2 a share then there's a suspicion that they have not and their 35% profit margin looks unsustainable.

in equities when we hit a big correction (if this is a big correction ) the first drop is not usually the biggest, this is just the relief rally until something else triggers a huge selloff (maybe, maybe not ).

Edited by Carl_Manchester on Monday 20th March 11:21

[isaldiri]

Carl_Manchester said:

the main issue is that most of these euro banks don't make any money or, if they do , they are stuffed to the gills with toxic management or, toxic investments.

if you buy anything in euro bank stocks , if you get anything better than break even you have won the competition.

look at the Barclays/Unicredit/Sabadell share price graphs, the list goes on.

apart from Unicredit the other one to watch is Man Group (MAN). apparently they fixed their trade algo years ago so it still makes a profit in a downturn. if it goes down through £2 a share then there's a suspicion that they have not and their 35% profit margin looks unsustainable.

Erm, Man are not a bank......

[Carl_Manchester]

Yes, that is correct, MAN is not a bank. it is one big computer algo. shop. It is a canary in the coalmine, that's why I watch what happens to it.

[Newc]

Part of the generic and ongoing bank problem is deposit guarantees. They should be restricted to deposit holding accounts, which pay no interest and are not available to a bank for making loans.

That is, banks should offer essentially a safe deposit service for your money, for which they charge a fee, and which would be government guaranteed.

Want to earn interest or pay no fees ? Then you go into the loan capital pool of the bank, and are exposed to the risk of default. Just like any other loans you can make, these deposits would not be guaranteed. Why would they ?

And we (society at large) have the wrong expectations of regulators. They can only be effective at defining common standards for markets to use, and being an arm of state law enforcement after the event for financial crime.

To expect them to “see the CS / SVB problems coming” is to expect them to have perfect foresight and an ability to manage the global economy. If 20th century communism taught us anything, it is that planned economies are failures always and everywhere.

[JagLover]

Some fairly large numbers on AT1 bonds

https://www.spectator.co.uk/article/credit-suisses...

[Gweeds]

Adam. said:

UBS yes

CS shareholders are getting UBS shares (1 per 22 CS share) the equivalent 0.76CHF per share - so 60% less than Fridays close.

What is surprising is they are getting anything, AT1 bondholders are supposedly higher up the pecking order but they are losing 100%

Seems odd that the shareholders upside has been put ahead of the bonholders.

[turbobloke]

JagLover said:

Some fairly large numbers on AT1 bonds.

https://www.spectator.co.uk/article/credit-suisses...

How about Italian banks, said to be the epitome of EU zombie banks.

[Digga]

turbobloke said:

JagLover said:

Some fairly large numbers on AT1 bonds.

https://www.spectator.co.uk/article/credit-suisses...

How about Italian banks, said to be the epitome of EU zombie banks.

Chinese banks were already on a negative outlook from Moodys earlier this month, even before all this.

[turbobloke]

Digga said:

turbobloke said:

JagLover said:

Some fairly large numbers on AT1 bonds.

https://www.spectator.co.uk/article/credit-suisses...

How about Italian banks, said to be the epitome of EU zombie banks.

Chinese banks were already on a negative outlook from Moodys earlier this month, even before all this.

They and we are living in interesting times.