The specter of Lehman Brothers hangs over Switzerland. Credit Suisse is worried.
Let’s not forget that when Lehman Brothers fell, the New York investment bank was still rated AAA. Either the best rating given by the rating agencies.
In other words, the clever one will explain why Credit Suisse has been so scary lately. But it is a fact, many indicators point out that a wolf is hiding somewhere. And some are aware.
On Monday, the action of the Swiss number two fell 11%, approaching the bar of 3 Swiss francs per share. That is a drop of 60% since the start of the year, compared to only -12% for its rival UBS (which, however, is also starting to feel the scorch…).
Compare with a share price of 13 francs at the start of 2021, 23 francs in 2015 and 85 francs before the subprime crisis of 2008 (triggered by the fall of Lehman Brothers).
The shape of the market for options backed by Credit Suisse shares suggests that their price will swing sharply over the next three months. CDS (credit default swaps) also show that there is water in the gas.
These derivative products (CDS) are used by investors to protect themselves against the risk of non-reimbursement of a debt. They came to prominence with the general public with the Greek debt crisis in 2014.
Their rise means investors are asking for more collateral for Credit Suisse-linked bonds. The cost of protecting against the risk of default over a five-year horizon is at an all-time high. Close to 300 basis points at the time of this writing:
While waiting for more information to filter through, ratings agency DBRS Morningstar affirms for his part that “external challenges such as war, inflation and rising interest rates collide with internal issues such as leadership change”…
Recall that the bank lost 5.5 billion dollars last year in the Archegos case. And that its new CEO has only been in place since August.
All this is good to take for bitcoin which was only an embryo in 2008. Not anymore. The bankruptcy of a banking giant and a Cypriot-style spoliation of savings will undoubtedly be good publicity for Bitcoin.
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