Like other Europe-focused strategists, William Porter at Credit Suisse has had some fun scrolling through the IMF’s mea culpa on Greece.
He notes that the IMF now admits that its actions were affected by a fear of market contagion, a misunderstanding of how to do a restructuring within a currency union and, most importantly perhaps, a dysfunctional dynamic within the Troika itself. Read more
Worried about the Fed’s taper tactics? Maybe Abe’s poisoned third arrow?
Andrew Garthwaite’s not. The Credit Suisse equity strategist has just hiked his S&P 500 forecast to 1,730 (from 1,640). For 2014 he’s going for 1900. Yes, Garthwaite sees another 15 per cent… Read more
Don’t mean to scare-monger, but consider this chart, plucked from a Credit Suisse note penned by Yiagos Alexopoulos and team. On the bank’s number crunching, the UK is just one of just two countries where fiscal stress has worsened this year — the other being Slovenia…
William Porter at Credit Suisse has been mulling the market’s muted reaction to the Italian elections. Increased stress is no longer finding its way into widening spreads, thanks to the Draghi “put”.
This credit strategist is concerned. A dampened signaling mechanism increases the risk of something going badly wrong — a market crash, even. Read more
Are you a Swiss bank? Do you have haven appeal? Want to make some quick, easy money? Then keep reading…
Credit Suisse has decided it will start charging negative rates on Swiss franc cash balances above a certain threshold. From CS: Read more
Credit Suisse has totally bored Matt Levine at Dealbreaker with their latest earnings announcement.
There are only so many ways to outperform in banking. But these days balance sheets are constrained, regulations are biting, and financial ‘innovation’ raises eyebrows. It’s just dull, in some respects.
Here’s Matt, bemoaning the utterings of Credit Suisse CEO Brady Dougan:
I had so much hope!
Or peripheral pain in terms of growth/shrinkage in compensation per employee. It offers a striking illustration of why both Greeks and Germans have reason to feel peeved… Read more
The British government ran a campaign during the Olympics promoting how GREAT Great Britain is. It wasn’t the most subtle of messages, but a fitting promo for The Bearded One.
Most bases were have covered, from heritage to innovation to shopping. The one thing they missed is the economy. Read more
James Sweeney, Jonathan Wilmot and the rest of the Credit Suisse gang that brought you the excellent King Collateral paper in April are back with a short follow-up note.
It’s a sharp contrast between the state of the global economy five years ago — when the first warning signs of an unusually serious crisis began to emerge — and where we are now. The framework of risk purging versus risk accumulation used by the authors is especially interesting, though they don’t get into as much detail as found in some of their previous notes. Read more
This is kinda sweet. From Fitch:
The Swiss National Bank’s (SNB) statement that UBS (‘A’/Stable/’a-’) and Credit Suisse Group (‘A’/Stable/’a’) should promptly improve their loss-absorbing capacity confirms that Switzerland maintains one of Europe’s strictest supervisory frameworks for banks, Fitch Ratings says. Read more
Get this. Jonathan Wilmot, chief global strategist at Credit Suisse, reckons that Europe is set to lead a rebound in global growth this year. He and his team are saying BUY Spanish and Italian bonds, and probably equities as well.
While a note dispatched to CS clients this week contains a few escape chutes, the core bullish argument is broadly as follows: Read more
Just in case anyone thought we’d gone soft on Sarko…
From Andrew Garthwaite at Credit Suisse on Wednesday: Read more
Are volatility-linked exchange-traded products (ETPs) getting too big for the Vix futures market? Are they comprising the price discovery role of Vix futures? Are they the reason why implied volatility curves have become steeply elevated?
As it turns out, Barclays Capital’s equity strategy team apparently thinks yes, it is possible (H/T the FT’s Ajay Makan). Read more
Last week a rather interesting thing happened in the world of volatility ETNs. The VelocityShares 2x short-term Vix futures ETN, backed by Credit Suisse and known as TVIX, announced that after a brief period of suspended issuance it would reopen the note to issuance orders from market makers.
It had previously closed issuance on February 21 citing “internal limits” at Credit Suisse. Read more
There’s been a lot of talk about the carnage in the TVIX on Thursday. The VelocityShares 2x short-term ETN, whose new issues were suspended by Credit Suisse on February 21 due to “internal limits”, fell 29 per cent. Curiously, the slide came just before an announcement from the provider that some level of issuance would be reinstated.
Understandably, the idea that the re-opening was leaked ahead of time is now doing the rounds. After all, why would the ETN, which had been trading at an 80 per cent premium to NAV, suddenly converge with its indicative value for any other reason? Read more
Summary: Credit Suisse bond salesman Nicholas Kyprios goofs around with clients ahead of a bond issue. No suspect trading is undertaken, there are no suspicious price movements, and in any case most of the bonds that might have been affected do not fall under the FSA market abuse regime.
No matter: Read more
And so to the harsh news amongst the “key messages” from Credit Suisse, which on Thursday followed both UBS and Deutsche Bank in reporting rather softer Q4 numbers than anyone seemed to be expecting…
Credit Suisse posted a surprise net loss of $700m in the last three months of 2011, weighed down by $1.1bn of charges, Reuters says. Analysts had expected the Swiss bank to post $472m in profit. The bank’s full-year net profit is not much more than it would have made in a single good quarter before the financial crisis, the FT reports. Just under half of the charges were related to “cost-efficiency measures”, with the rest tied to the shrinking of Credit Suisse’s investment bank. Revenues were down some 46 per cent from a year earlier, the WSJ adds. Read more
Two former Credit Suisse traders have have pleaded guilty to conspiring to overvalue mortgage-related securities at the height of the financial crisis. David Higgs and Salmaan Siddiqui admitted to criminal charges that were the first involving valuations of mortgage-backed securities during the crisis and come four years after the alleged mispricing, reports the FT. Criminal charges against a third banker are expected to be unsealed later on Wednesday, people familiar with the matter say. Read more
Federal prosecutors are to file criminal charges against former Credit Suisse traders alleging they purposefully mis-priced CDOs, which triggered a $2.8bn write-down at the bank, the FT reports. It is the first criminal case to emerge from the wreckage of valuing structured products in the crisis, though the SEC is also likely to press civil charges. Two traders are expected to plead guilty. Prosecutors will argue that the traders inflated CDO prices to protect their bonuses despite knowing that the value of the securities had dropped, the WSJ adds. Credit Suisse in 2008 explained its write-down as the result of “mismarkings” in CDO prices, Bloomberg says. Read more
Two former Credit Suisse traders are to be hit with criminal charges for allegedly mispricing mortgage-related securities that resulted in a $2.8bn writedown by the bank at the height of the financial crisis, the FT says, citing people familiar with the matter. The two men are expected to plead guilty to charges from federal prosecutors alleging that they purposefully mispriced CDOs to avoid taking losses in 2008, a person familiar with the matter said. It would be the first criminal case involving the valuation of structured products during the crisis. The SEC is also expected to file civil charges against the traders. Credit Suisse, which reported the mispriced positions to regulators in the US and UK, is not expected to be charged as a result of the investigation by US federal prosecutors and the Federal Bureau of Investigation. Read more
Credit Suisse is to pay employee bonuses with a structured note backed by derivatives that bolsters the Swiss bank’s balance sheet and further cuts the amount of cash as a component of bankers’ pay, reports the FT. Brady Dougan, chief executive, told staff: “It is a very effective risk-reduction measure and the right thing to do in the current environment. It provides a healthy coupon, provides a long-term incentive, and it helps the firm achieve its strategic goals.” Credit Suisse used a similar structure at the height of the crisis in 2008, paying bonuses from a $5bn pool of collateralised debt obligations. Those payments have performed extremely well, with a 70 per cent increase in value up to today, Mr Dougan’s memo said. In addition to reducing the cash paid to bankers, the use of riskier assets in bonuses improves capital ratios. Read more
Credit Suisse on Thursday won the bidding for a $7bn portfolio of mortgage-related securities that used to belong to AIG and was sold by the Federal Reserve Bank of New York, the FT reports. The sale marks a step forward in the NY Fed’s efforts to sell the $20bn portfolio, called Maiden Lane II, after suspending previous auctions a year ago. The NY Fed decided to sell the securities after receiving an unsolicited offer from Goldman Sachs this month. Through BlackRock Solutions, its investment manager for Maiden Lane II, the NY Fed then took bids from four banks because it had said it would sell the securities through a competitive process. Read more
Goldman Sachs, Barclays Capital, Bank of America and Credit Suisse were on Tuesday finalising bids for $7bn of mortgage-related securities that used to belong to AIG and are due to be auctioned later this week by the Federal Reserve Bank of New York, the FT reports, citing people familiar with the matter. The auction for the debt, which was acquired by the New York Fed as part of the bail-out of AIG in 2008, is scheduled to take place on Thursday, with BlackRock Solutions managing the sale. The four banks and the New York Fed declined to comment. The securities, which have a notional value of $7bn, are part of a $20bn portfolio housed in a special purpose vehicle called Maiden Lane II. T Read more
So Thursday morning’s auctions of Spanish bonds and Italian one-year T-bills went well, and on Friday there’s an Italian bond auction for up to €4.75bn.
The Spanish sale was especially impressive — from the FT earlier, emphasis ours: Read more
Credit Suisse is offering its hedge fund clients off-the-shelf products that allow traders to replicate hypothetical gains made by betting against European stock indices that include equities covered by eurozone short selling bans, the FT reports. The bank has made five shortable baskets “optimised” to track leading European indices as closely as possible, based on replacing restricted stocks – mostly banks and other financial companies – with correlated assets. A sales document from last year says the optimised baskets at the time tracked the full indices in some cases to within fractions of a percentage point. The document highlighted that the baskets specifically excluded the restricted stocks.
HSBC said on Wednesday it is pulling out of private banking in Japan, the latest in a series of moves by major banks to streamline operations as they try to cope with volatile markets, profit-hurting economic jitters and regulatory pressure to conserve capital, reports the WSJ. HSBC said in a statement it agreed to sell its Japanese private-banking business to Credit Suisse in line with a global business restructuring it announced earlier this year that will see it cut 30,000 jobs as it pares back small or inefficient operations. Read more