Talks about trouble at the Swiss investment bank CreditSuisse CS gained ground over the weekend, and twitterati began to raise the specter of a Lehman-like collapse.
What Credit Suisse is missing: Credit Suisse fundamentals have deteriorated rapidly thanks to a combination of macroeconomic factors and company-specific malaise. The bank was rocked by a series of scandals and mishaps that affected its finances, the most notable being the situation that ensued Collapse of US hedge fund Archegos Capital, founded by Bill Hwang, early 2021.
The Swiss bank then warned of a significant impact after exiting positions with the fund. In addition, the bank was fined by a Swiss court in June for lax controls that allowed one of its employees to help a Bulgarian drug ring launder money, the New York Times reported.
In July, Credit Suisse said it posted a loss of 1.59 billion Swiss francs ($1.6 billion) for the second quarter, compared to a profit of 253 million Swiss francs a year earlier, as its investment banking business plummeted .
As a revival measure, the company announced a change at the top, the appointment Ulrich Korner as the new CEO and also initiated a strategic review process. Problems at the bank included some high-profile departures. The setbacks began to affect the bank’s share price, which has been in a secular decline since March 2021.
See also: Credit Suisse considers splitting up investment banking unit, outlines plans
Credit Default Swaps Peak: Credit Suisse credit default swaps, or CDS, a derivative instrument that allows one investor to trade their credit risk with another investor, rose sharply on Friday, reflecting market perceptions of rising risk. It is now approaching the highs of the 2008 financial crisis, when the US investment bank Lehman Brothers went bankrupt.
Houston, we have a problem. market capitalization of $CS is now a rounding error. 35x leverage. That and Deutsche Bank… a canary…
