Dont panic Credit Suisse isnt the next Lehman Brothers

Don’t panic: Credit Suisse isn’t the next Lehman Brothers – eFinancialCareers

Junior bankers and traders who are either already at Credit Suisse or have offers to move to Credit Suisse next year can step out of their safe spaces. Contrary to reports this weekend, the bank is unlikely to go under. So say some of the industry’s most knowledgeable figures, many of whom actually witnessed several banks go under in 2008.

Where did the rumor about the impending departure of Credit Suisse come from? Twitter seems to have the smoking gun in hand. people like Spencer Jakab the Wall Street Journal’s Head on the Street column, and various pundits have posted tweets like the ones below, after Credit Suisse’s (most recent) CEO, Ulrich Koerner, released a memo last Friday informing employees that that the bank’s “daily share price performance” should not be confused with its “strong capital base and liquidity position”.

According to the Financial Times, Credit Suisse spent the weekend reassuring investors that everything is fine. Some are convinced. Although Credit Suisse is the “worst big bank in Europe”, it is not going under, said one.

Still, some Credit Suisse juniors appear to be panicking. A thread on the Wall Street Oasis forum site is tinged with hysteria over withdrawn job offers and the danger of feeling “fucked” in a crisis. – “It’s honestly a bit scary,” says a CS first grader.

Luckily, it’s not just Credit Suisse itself that’s reassuring. Boaz Weinstein, the CDS king of the financial crisis and founder of Saba Capital Management, also thinks the “Credit-Suisse-is-Lehman” narrative is exaggerated and has also expressed this on Twitter.

The “scaremongering” surrounding Credit Suisse is “rough,” says Weinstein in another tweet. Others, including some journalists, seem to share this view: the FT’s Tom Braithwaite suggested that Spencer Jakab might want to delete his tweet. He did not do it.

The fundamental difference between Lehman in 2008 and Credit Suisse in 2022 is expressed in a different way Twitter comment They note that Credit Suisse’s critics “mistake a US investment bank, whose CEO had no friends in government, for a Swiss banking giant stuck in a country that prides itself on the safety of its institutions … and its banks.” “.

Even some of the most recently unenthusiastic ex-traders and CEOs of Credit Suisse agree with the verdict that everything is fine. “It’s BS,” says one of the weekend panickers. “Credit Suisse has reduced risk and now has one of the safest balance sheets in the market. It has been scrutinized extensively over the last two years and claims that this is the next Lehman are utter nonsense by people who don’t understand financial analysis. “

Credit Suisse isn’t a good deal, but it’s not a very risky business, he adds. “The market is volatile and Credit Suisse is unpopular, but they don’t need as much capital and their CDS spreads are half those of US banks in 2012.”

Another recent ex-CEO points to Credit Suisse’s Thursday update for fixed income investors showing it beats capital requirements. “The credit situation is fine, but Credit Suisse will probably need to raise equity soon to send a strong message to investors,” he says. One way the bank can do this is by selling its securitization business as promised. Deutsche Bank’s Benjamin Goy last month calculated that Credit Suisse would need to raise $4.1 billion and said its securitized products business could raise nearly two-thirds of that. In a note last week, analysts at UBS said even a partial sale could add $1 billion to capital ratios.

While Credit Suisse may not be “the next Lehman,” it could still prove to be a somewhat unreliable place to work, especially if you work in investment banking. At the very least, this weekend’s events should make the bank more capital-preserving and less inclined to maintain a large and capital-hungry investment bank. Knives sharpened for the upcoming strategy announcement could now be even sharper. And if the Swiss central bank does get involved for some reason, the investment bank is likely to go first: “They would completely change the bank and focus on Swiss universal banking and private banking/wealth management,” she says to a recent ex-MD.

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