Credit Suisse the Next Lehman?
Increasing chatter of serious issues with CS
CS's 5yr CDS's have shot up insane amounts
Anyone have any insights?
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Lol the recent posts have been basically that from incoming CS analysts
CDS looks fine? It's a shit bank, but I don't see any credible news regarding massive losses there.
Edit: sorry I was looking at a stale chart. Yup their CDS is blowing out.
UK financial system almost collapsed this week and had to be bailed out urgently.
That was mostly due to the disturbance of the ALM equilibrium on the balance sheet's of many institutions that are highly exposed to interest-rate risk, and who have a lot of ALM to do (pension funds, etc). So it can be argued that it was systemic . The issue with CS relates only to CS. of course if it does go under, which is very possible, the whole system will be at risk, thus seeing a transition from idiosyncratic to full on systemic risk, but fundamentally, the issues that they're facing are due to their own missteps rather than some systemic issue imo.
ps: this is just an opinion, and far from being fact
Scary stuff!
None of this surprises me. Buckle up boys and girls.
Ryan Cohen said the same thing a few months ago
I'm going to laugh when the risk is dumb apes holding GameStop like they guessed all along.
Most likely the next Merrill Lynch
Swiss government bailed out UBS in 08, doubt they’ll let CS fail
Capital One and US Bank smacking their lips in anticipation of a CS meltdown...
Definitely not the kind of stuff that the CEO of a bank with strong liquidity would say.
Very strong Lehman early September '08 vibe.
Markets are also sensing that something is wrong with CS: share price down 56% YTD, CDS surging to '08 credit crunch level, multiple credit rating downgrades this year, senior executives recently leaving (McCarthy, Welter), etc.
If I were at CS right now, I would be looking for a way out ASAP before things get very ugly.
Lehman vibe indeed
I'm at CS. I'm working on a fairly large megadeal and everything went radio silent mid week through this weekend with my MDs (we have some senior bank people on this deal). Very weird with how much work we had going on and future deadlines.
Seems like leadership is busy with something else.
Might be a coincidence, but definitely feels odd.
run fast lad
Im telling you to run.
Trust your gut feelings
Clock is ticking
.
For those of you who don't have access to a Terminal:
How does this compare to its European peers?
How did other firms compare pre-2008 in CDS? Would love to see that data.
October 3 Updates
Markets recently closed in Europe.
CS 5Y CDS now at 335 bps and CS 1Y CDS exploded today:
Shitibank says CS is not Lehman though:
Bro is pumping out analyses and addl. analyses for a rando on WSO. Gotta love the community
Maybe I’m just a simple mid-market industrials guy, but can’t they just do a capital raise and move on?
Yes
Brother, I think the amount of capital they’d need to raise is obscene. They can’t lever higher at these rates. They’d need a fat pipe from a large asset manager.
I’ve heard ER analysts at other banks call for 5-6 billion in raises. That’s significant given a 11 billion cap
With where their CDS is trading right now I think it would be tough to say the least.
.
The market is pricing the risk of a Credit Suisse default at similar spreads as GFC levels.
Are these CDS issued by CS or CDS written for protection against CS bonds?
Good thing Credit Suisse didn't default in the GFC then, isn't it?
What led to this? Just the BOE move? I was just scrolling through Twitter a few days ago and it mostly about UK drama and all of a sudden it's on CS.
CS has been in the dumpster for at least the last year.. huge leadership changes, multiple strategic reviews, key dealmakers moving elsewhere, and stock down massively. Strategic review due out the end of this month too. In short, not one specific trigger but a slow avalanche of problems.
Think the story only got "dire" over the weekend because the CEO make some comments that were taken a bit out of context and became a Twitter meme. IMO pretty unlikely CS actually goes down - probably will be some rescue financing or large restructuring.
Almost signed an offer with CS in August. Gut told me not to after the significant layoffs and inability to pay bonuses in cash. I'm at a MM, but definitely a happy camper.
We're hiking into deflation. This is NO evidence of current inflation still persisting just lagging data points spinned for sensationalism. Powell needs to put the brakes on NOW he is out of his damn mind frankly. Anyone thinking otherwise has a very skewed perception of the true risk of "inflation" versus global economic collapse.
Going to push back on this - no idea what you're looking at saying we're not having inflation or we're past it, that said it's a different debate if the answer is continuing to hike rates
And what is the true risk of inflation according to you, might I ask.
This is one of the worst takes i've ever read, congrats
Found Elizabeth Warren's burner
Fed is doing things right. Look at what happened to Japan in 1989.
Parroting Wharton Professor Jeremy Siegel's take. Siegel thinks inflation has already peaked based on leading indicators, what these indicators are I'm not entirely sure. Even if inflation peaked, going from over 9% down to 8% is hardly a victory. Most talking heads calling for the fed to stop the rate hikes have a lot to gain (Elon, Kathy Wood).
I mean their chairman is called Alex Lehmann…
I would speculate what’s going on is a major sale of one of their business (ie an outright sale of its IB practice).
They are not in a good spot but seems like it’s more of a failing company than a total collapse like Lehman. Divestitures seem like a logical next step.
The advisory business won’t be an attractive asset given the fact that a lot of their advisory work is with sponsors and if they are, I guess simply put, not able to lend to them (understand it’s more complex), then why would they get the same mandates? Jefferies will just take more of the deals they would bake off for.
Probably the best source for news on Suisse banks is the news portal insideparadeplatz.ch. In German but you might use google translate or so. The author is always very sarcastic but has deep ties into the Swiss banking scene. His articles are expressing deep concern and he also assumes the Swiss government would bail out CS.
If you’re a junior at CS, look to lateral asap. Tbh I’d even trade down for a strong MM gig. Family friend is a VP there and expects huge cuts to the US IB practice … 30%+
Not sure why this is getting downvoted…This person is giving a practical outlook. I know none of the college juniors here would ever dare to work at a MM bank but you need to consider general outlook of the bank you want to work for, that goes for any corporation.
Hello, new here. What’s MM stand for?
Middle-aged masturbation
"Middle Market", so not a Bulge Bracket Bank. Smaller deals
Haven't seen anything from any credible financial reporter.
there are no credible financial reporters.
oh, you are waiting for someone like Andrew "I have a man crush on Jamie Dimon" Sorkin to opine?
Most of those guys are corrupted and won't report real negative news lest they lose their contacts.
Seems like it’s just one guy that tweeted out some bogus rumor that didn’t even name CS specifically.
He's deleted the tweet now lol
theres an emergency fed meeting monday
vatican has moved all their swiss banks funds to vatican controlled banks by sept 30th
more rumors a CS rx starts Monday
40% of the russell2000 companies are unprofitable
money velocity is at an alltime low
Source?
The Fed meeting today was about as run of the mill as it gets. "Expedited procedures" meetings happen every two - four weeks or so.
Per financial times today
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https://www.ft.com/content/6104a699-fa7f-4a81-9c35-a9a2f8ff92d2
"Credit Suisse team leaders are said to have been working the phones all weekend to reassure customers, counterparties and investors on capital and liquidity, as well as to reiterate that restructuring plans are on course."
Sounds like Dick Fulds final moments
Can’t divulge too much on this but heard there are some funds that CS is dodging speaking with a bit. Unless those calls happened this weekend, I have a friend at a notable credit fund who said CS is trying to leave them in the dark.
heard the same thing as well
A lot of this looks more like people wanting to believe they're in the Big Short and can sense the coming earthquake instead of any reasonable logic. If you're at CS you should definitely be more worried about them exiting your business or MD's leaving than a bail-out due to collapse.
My thoughts exactly. Everyone likes a good drama storm but to be honest I think the big risk right now if I had to pick a bank that could be in trouble, I'd say DB or Commerzbank if they have exposure to Uniper or others affected by skyrocketing energy prices in Europe. CS is going to have a government backstop from Switzerland. Whether or not that's a good thing or ethical thing is another debate entirely, but it's going to happen.
My knowledge of CDS is limited so can someone educate on why a 250bps pricing level is noteworthy other than it being a sudden rise and close to GFC levels? If there was a genuine concern of default would it not be shooting far beyond this level? As a tweet notes in the FT article linked above, CS CDS is at same level as General Motors and c.100-150bps over its peers?
Bloomberg article said current CS CDS spreads are nowhere near distressed levels. Take that as you will.
Thanks. That’s basically my point, CDS spread doesn’t imply distress? If share price plummets tomorrow /CDS spread blows out then it gets more interesting.
Agree. MS CDS was twice as wide in 2011/2012 and they weren't in default. A lot of the Twitter chatter is day traders/crypto bros blaming them for shorting GME or whatever, it's just the latest meme on there
Not to say that CS isn't in trouble at all, but Twitter is just taking this and running with it
100%. Let's put this into context: 250bps CDS spread means I pay $1 and if CS goes under in the next year, the insurance pays out $40. 40:1 odds doesn't spell lehman moment to me. For gods sake, the guy who started this rumor on twitter is a local news reporter in Australia lmfao
From my limited understanding: CDS trade above stress levels of GFC and markets give them a decent % chance of a default within the next 5y.
The letter of the CEO to calm the shit down, was called as lousy at best and market participants are not happy at all.
The low share price makes it harder to raise capital, which they might need (various scandals prior to the situation, it’s ugly). So if people loose trust into them, their assets are most likely getting downgraded /re valued, which makes it harder to cover for potential credit risks and this is then reflected in the CDS as well.
Deep down we all wants investment banks to fail because we all hate banking
Senior Credit Suisse executives spent the weekend reassuring large clients, counterparties and investors about the Swiss bank’s liquidity and capital position in response to concerns raised about its financial strength.
Executives hit the phones after spreads on the bank’s credit default swaps, which offer protection against a company defaulting, rose sharply on Friday, indicating investor worries over the bank’s financial health.
You think Lehman in its final days were telling their clients "Yeah, we're fucked. Take your money while you can"?
Why is there an emergency meeting tomorrow for the feds?
Deleted
Former ING Head of Fixed Income says no CS or DB collapse incoming: https://twitter.com/MacroAlf/status/1576641291961520129
To all incoming CS analysts.
Stop panicking. Just wait and see what happens. Even if you lose your job, you'll get a great life lesson. Your ex-CEO lost his job only a week after his chairman and board publically announced they were supporting him. Is he devastated? Maybe. But he's still surviving!
“Credit Suisse downgraded to credit sus”
I think they will just sell their US practice. If that happens, who would pick it up?
no idea but i truly hope not MS
Why
Gorman might want the wealth management / PB piece, especially at a heavy discount. Probably won't take their IB piece (much more cost-effective for a bank like MS to just poach their best ppl with huge sign-ons which are unlikely to be too high these days given the market). If you were a bank like Capital One or Truist without a well established non-MM ib franchise it might make sense to buy the CS IB franchise wholesale. But for an MS / GS / JPM, the CS IB franchise is value dilutive.
If they do this, wouldn’t it make more sense to go ahead with a full sale of the IB platform incl. EMEA and Asia? Maybe retaining DACH activities to support their Swiss client base.
The issue is that buyer universe would be quite limited I guess. I’m not a bank expert but I suspect you’d need a Western bank with broad shoulders but sub-scale global IB operations. Maybe someone like BNPP, SocGen or UniCredit in Europe / RBC or TD in North America. And I can’t even fathom what a nightmare the integration would be
Easy to see the eye catching statement that the spread matches that during the financial crisis, but 250bps is hardly at a level of high risk of default though. Leh at 750 area leading up to '09...now that's distress.
Chances are things will probably continue to worsen but we have some time before anyone needs to panic.
https://www.cnbc.com/2022/10/03/credit-suisse-seeking-to-assure-investo…
"Credit Suisse has also been in talks with investors to raise capital with various scenarios in mind, Reuters said, citing people familiar with the matter as saying it includes a chance that the bank may largely exit the U.S. market."
This is what I guessed. Either they sell the US practice in a spinoff or just completely shut it down.
What do you think timeline would be for this case?
Which case? I mentioned two in my post
It looks like MDs at CS are starting to officially jump ship. Saw a few posts on LinkedIn.
Anyone notable?
I heard the entire tech group is gone and no filled with bunch of new MDs from much lower tier banks
Those were MDs that left months back and just wrapped up their garden leave
Liz Truss, the next CS CEO
2nd year MBA (disregard my WSO title, not updated) who interned at CS last summer. For what it's worth, we just got a notification from university career services about CS's upcoming info sessions and coffee chats, i.e. they're still hiring. Take that for what it's worth.
I'm not quite panicking, yet, but safe to say I'm monitoring this situation closely.
Hiring a couple of summer associates doesn’t really mean much…not sure that would calm investors.
I think they're more so referring to whether we'll get offers pulled / they'll exit advisory business
what else do you think they would have done lol? Stop campus recruiting altogether and freak out everybody in the firm? They have no choice but to carry on as if everything's okay
Nah, CS will never have Lehman-level clout
Del
Any bulls on CS stock lol?
why would anyone buy the stock right before a mega-dilution event that could dilute you 60-90%?
Maybe if they expect a Swiss government bailout, which could send CS shares up. Kodak went up like 10x after getting government funding for making a vaccine, and it was a failing company.
I’ve been thinking about LEAPs. Need to do more research but assuming they somewhat fix the IB group, and the other parts of the biz do just OK, the stock should pop up once bankruptcy/solvency/other concerns dissipate.
LEAPs would keep exposure low while keeping the upside high.
Bonds might be more attractive. Yielding 10-11% rn
CNBC just said there’s a 95% chance of force merger or bailout in the next 1-2 months but it’s not a Lehman moment
I really find content provided by CNBC to be highly questionable.
What? Cnbc?
That's impossible
How does this affect other investment banks? does it affect other financial institutions - PE etc?
People want it to be like last time. The cold reality is there were only 13 recessions last century and 3 so far this one. That’s not a lot of data points to base a “science” off of. Each situation is unique. This isn’t Volcker rates or even close. We had 20%+ unemployment and people kept paying their bills. They just overshot a bit, but it is way better than the alternative. Additionally, it turns out Xi seems to be a bit of an idiot and it takes time to unwind trade dependency with said idiot. Or China can go back to what got them here: more openness and free markets, not Mao 2.0. Same with Pootin. He’s like 5’4” and wears lifts.
Thanks for the history lesson. Please go back to WFH, we'll take it from here.
Well that's it then. Cs bros, expect your key cards to not work in the morning
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it was like this for the last 3 months or something
CS has been like this for the last 3 months or something.
"Our CET 1, Tier 1 leverage ratio l, and TLAC are in line with if not better than peers"
Can some FIG guys shed some lights on these?
How hard is it for the bank to get its feet on the ground again?
What class was this and how did the discussion come up and how long did she actually talk for? I’ve def dealt with those type of ppl in my classes before
The comment got deleted. It was in Econ lab - we're doing a group project about inflation, rates, and the general market going to shit and she just brought it up.
"By the way, did you see what happened to Credit Suisse?!" and then the hell began. She rambled for like 15 minutes citing that they had layoffs and other very generic shit. I asked her: "What do you think about CS' CDS?" She replies "What does CDS mean?"
Eye-roll
Currently at CS. Whether our bank goes under or gets acquired, once announced we'll soon see massive layoffs across all levels. Trying to lateral as a VP is just a nightmare. Almost no spots across the street at the moment. Gotta buckle up......
Best of luck and hoping something great comes your way
Praying for you fellow CS bro.
What are your thoughts on people who are saying everything's fine?
My old firm is a broker dealer looking for VP and AVP roles to fill. This could be good temporarily until the recession weathers.
PM me.
At CS rn in a top group. Just FYI all this stuff is wildly overblown. Most likely nothing will happen to the advisory business. Take a deep breath and get off Twitter.
saying you are at a top group at CS is like saying you are the best crewmember on the titanic
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This is that dude (the violinist)
lmfao
For what it's worth, spoke to 2 people in coverage groups and they said MDs / clients aren't worried and they're still winning mandates. They only see layoffs in Trading, ECM/DCM and LevFin + 10% layoff like GS which shouldn't affect incoming or first years
Those same 2 people are actively spamming their resume everywhere and dreaming of being employed by KeyBanc in Cleveland instead of laid off in NYC finding a lateral spot
Delusional. CS has said on record they are considering a divestment of the US advisory business, perhaps as early as this month.
Ask someone older what happens when another bank buys a a divested advisory business (it's not pretty for the target employees).
Who would be a advising CS on asset sales and restructuring?
probably an investment bank with a FIG group. not 100% sure though - might need a new thread for that topic
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