July 2016

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ECB data shows Italy, France, Greece, Spain most active propping up their bond markets

Looking at this data showing central banks most active propping up bonds in the euro area and the comparing to what “pure play private banks” like Julius Baer hold on their balance sheet does make you wonder about the sustainability of the ECB purchases and what effect it has on the bond market. The data below shows what Julius Baer invests billions in. Especially debt instruments and there financial institution…


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UBS Results: The Headwinds and The Green Shoots

The interest rate environment is dampening the business model which relies on “net interest income” , as can clearly be seen above (marked red). Luckily for banks in general and UBS in particular,  loyal customers aren’t putting stronger pressure on fees and commissions. Own fund business schrinking and lighter customer activity are lowering commissions slight as can be seen in “net fee and commission income”. A noteworthy positive is the…


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Credit Suisse underlying business – 2Q16 results

You can’t be much else than shocked by the dramatic revenue drops. This is the unfiltered story, no PR-talk, no salesman talk, just facts and figures: Credit Suisse 2Q16 1Q16 2Q15 Down Net interest income 1’999 2’011 2’869 -30.32% Commission and fees 2’796 2’675 3’259 -14.21% Trading revenues 94 -271 498 -81.12% Other revenues 219 223 329 -33.43%     Then compare it to expenses: All small moves. Compensation and…


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Pure Play Swiss Private Bank (Julius Baer – Vontobel)

In the H1 report Julius Baer is described as a pure play private bank. That’s why I thought it may be useful for discussions to know what this business model entails. Where do the profits in a pure play private bank come from? According to my calculations ** 22% from interest income (8% at Vontobel) 38% from management and fund fees (55% at Vontobel) 16% from commission (~client trading) (12%…


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Julius Baer Structured Products & Dividend Games Very Profitable, Only in H1 Always

I find it rather interesting that dividend income from trading portfolios (CHF 180m, 121.9) and net trading losses on equity instruments (CHF 126m ; CHF 104m) only happen during the swiss dividend paying season. The profit margin between the dividend income on trading portfolios and the equity losses on trading are 15-30%. As a sidenote: withholding tax is 35%. Also: Dividends in Switzerland are mainly in H1. The dividend trading income…


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Credit Suisse credit agency ratings – near problem area?

The comparison below is interesting for short-term ratings. Credit Suisse and SocGen would lose the A1 Short Term rating with the next step. Now why is this important? Many multi-billion pension funds are forced to move their liquidity from banks that lose the A1 Short Term rating. That will mean a drain on liquidity, which in turn leads to furth problems. Also the rating impact by itself can already cost…


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Credit Suisse business model flaws – high interest costs

Outstanding capital insturments of Credit Suisse according to this presentation. According to my calculations (see table below) Credit Suisse pays over CHF 1 bn per year in interest rate costs alone. The coupon they need to pay is high. High risks demand high coupon. So much profit has to be generated to just cover fixed costs. At the same time more and more peer-to-peer lending business models are springing up, robo-advisors,…


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How safe is Credit Suisse?

According to the above presentation for fixed income investors of Credit Suisse the bank is less dependent on counterparty funding. Instead it has core customer deposits and long-term debt making up a larger proportion of balance sheet. I don’t like this statement of the Credit Suisse CEO today (Interview with NZZ): He’s asked are customer deposits (so crucial according to the above graph) leaving Credit Suisse in last days, weeks….


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Which banks are suffering most 2016

This bubble diagramm gives a good impression of which banks, by market cap have suffered most this year. The highest percentage losers are the ones that the market thinks are most likely to fail, need bail-outs, increase capital – or generally put: Which will be first to fall off the cliff. Unicredit, RBS, Credit Suisse, Deutsche Bank, Barclays, UBS – in that order – are considered unsafest by shareholders, currently….


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Deja Vu with Brexit – Standard Life Fund Freeze – Pre Bear Stearns Moment – the Lehman Moment can still come

If you like working through the worst case scenario it would probably be sensible to consider the Brexit Vote the beginning of problems to come. http://www.telegraph.co.uk/investing/funds/standard-lifes-29bn-commercial-property-fund-halts-trading-as-wi/   (Telegraph Group Business Editor James Quinn is doing a great job of reporting effects of Brexit!) Trading in a £2.9bn commercial property portfolio managed by Standard Life Investments has been halted after a flood of withdrawals exhausted the fund’s cash reserves. Standard Life said…