How safe is Credit Suisse?

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. He doesn’t say no, but says employees are doing a great job, that is diplomatic for yes, in my opinion.

credit-suisse-tidjane

Also this in another important sunday paper in Switzerland:

Basically saying: Swiss customers are transfering money to safer banks, like ZKB (with cantonal guarantee “Staatsgarantie”). It also notes, that UBS didn’t nearly fail in 2008 because of capital, but because customers and especially counterparties were pulling billions out daily.

schweiz-am-sonntag-credit-suisse-kunden-ziehen-gelder-ab

In conclusion:

  • The CEO doesn’t deny they are seeing outflows
  • The banks capital is in better shape than in a long time
  • The CEO seems to think Q2 results shoud reassure investors
  • At the same time he states that we’ve only seen one quarter of twelve quarters of the transformation process
  • If Q2 doesn’t reassure investors I wouldn’t be surprised to see floodgates open
  • Time is a luxury Credit Suisse doesn’t have; so point 4 above could be rendered mute by reality.
  • In my view, and to reassure customers of the “crown juwel” (according to Tidjane Thiam), the Swiss Universal Bank should be granted temporary state guarantee. This would stop outflows. It would give the CEO the urgently needed breathing space. — Problem: At what price could this state guarantee be made?  Is it legally possible? Would CS shareholders have to take a large write-off?
  • It’s not the CEOs fault

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