Is Credit Suisse on the Verge of Bankruptcy?
Over the past year, the exodus of capital and customers from the bank has led to devastating results—a brief review.
Zurich, 11.02.2023
Zurich, 11.02.2023
Credit Suisse’s history is a long and storied one, full of intrigue, scandal, and triumph. It all started back in 1856 when a group of visionary Swiss bankers came together to create a financial institution like no other. With their combined expertise and innovative spirit, they built Credit Suisse into one of the most powerful banks in the world, with a reputation for cutting-edge technology, unrivaled wealth management services, and a commitment to ethical and responsible banking practices.
Throughout its history, Credit Suisse has faced numerous challenges and controversies, including the 2008 financial crisis, allegations of mortgage fraud, and more. But through it all, the bank has remained steadfast in its commitment to its clients and its mission, continuously evolving and adapting to meet the changing needs of the financial world.
Today, Credit Suisse is widely recognized as one of the world's most innovative and forward-thinking financial institutions, with a reputation for delivering its clients the highest levels of service and expertise. So whether you're an individual looking to grow your wealth, a corporation seeking funding for your next big project, or a government looking to secure your financial future, Credit Suisse is the partner you can trust to help you succeed :)
Throughout its history, Credit Suisse has faced numerous challenges and controversies, including the 2008 financial crisis, allegations of mortgage fraud, and more. But through it all, the bank has remained steadfast in its commitment to its clients and its mission, continuously evolving and adapting to meet the changing needs of the financial world.
Today, Credit Suisse is widely recognized as one of the world's most innovative and forward-thinking financial institutions, with a reputation for delivering its clients the highest levels of service and expertise. So whether you're an individual looking to grow your wealth, a corporation seeking funding for your next big project, or a government looking to secure your financial future, Credit Suisse is the partner you can trust to help you succeed :)
In 2022 and early 2023, the stock market experienced significant changes. The end of pandemic-related financial support, the Federal Reserve's interest rate hike, and uncertainty in the banking industry put pressure on some less-established companies.
Credit Suisse's investment arm faced a challenging time, as rumors about its business practices were confirmed in an interim public report released on February 9, 2023.
CS reported a net loss attributable to shareholders for FY22 is CHF 7.3 bn, compared to a net loss attributable to shareholders of CHF 1.7 bn in FY21.
The net loss attributable to shareholders for FY22 included an impairment of deferred tax assets related to our strategic review of CHF 3.7 bn taken in 3Q22.
Credit Suisse's investment arm faced a challenging time, as rumors about its business practices were confirmed in an interim public report released on February 9, 2023.
CS reported a net loss attributable to shareholders for FY22 is CHF 7.3 bn, compared to a net loss attributable to shareholders of CHF 1.7 bn in FY21.
The net loss attributable to shareholders for FY22 included an impairment of deferred tax assets related to our strategic review of CHF 3.7 bn taken in 3Q22.
The report led to a sharp drop in the company's stock price, which fell from $10 in January 2022 to less than $3 on December 19, 2022.
The historic Hotel Savoy in the heart of Zurich's financial district is set to be sold. The 200-year-old hotel, which is currently undergoing a major refurbishment and will reopen as the Mandarin Oriental Savoy Zurich in 2024, is said to be worth 400 million Swiss francs ($408 million), according to the finance blog Inside Paradeplatz. Credit Suisse is reviewing its property portfolio as part of its global real estate strategy.
Credit Suisse's Efforts to Sell Real Estate to Cover Losses
On October 6th, news broke about Credit Suisse's attempts to sell some of its real estate holdings. Reuters reported on the matter in a news article.
Credit Suisse announced that it had decided to start the sales process for its renowned Savoy Hotel located on Paradeplatz in the heart of Zurich's financial district.
As part of its ongoing global real estate strategy, the Swiss bank regularly reviewed its property portfolio, according to a spokesperson.
"We will carefully assess all offers and potential investors and communicate any decision in due course," the spokesperson stated.
The nearly 200-year-old hotel closed earlier this year for a major refurbishment and was set to reopen in 2024 as the Mandarin Oriental Savoy Zurich.
On October 6th, news broke about Credit Suisse's attempts to sell some of its real estate holdings. Reuters reported on the matter in a news article.
Credit Suisse announced that it had decided to start the sales process for its renowned Savoy Hotel located on Paradeplatz in the heart of Zurich's financial district.
As part of its ongoing global real estate strategy, the Swiss bank regularly reviewed its property portfolio, according to a spokesperson.
"We will carefully assess all offers and potential investors and communicate any decision in due course," the spokesperson stated.
The nearly 200-year-old hotel closed earlier this year for a major refurbishment and was set to reopen in 2024 as the Mandarin Oriental Savoy Zurich.
The Downfall of Credit Suisse Simplified: Archegos
It all comes down to one name: Archegos. The collapse of this hedge fund was the main reason behind Credit Suisse's recent troubles.
Archegos Capital Management was a family office hedge fund founded by Bill Hwang, a former Tiger Management trader. The fund specialized in passive investing and had built up significant positions in several stocks using a combination of equity and derivatives.
In March of 2021, several of the stocks in which Archegos had invested experienced sharp declines, which triggered margin calls from the banks that had lent the fund money to finance its positions. When Archegos could not meet these margin calls, the banks were forced to unwind its positions, which led to substantial losses for the banks involved.
The exact reasons for the declines in the stocks held by Archegos are not entirely clear, but it is believed that a combination of factors, including broader market volatility, changes in regulatory rules, and company-specific news, may have contributed to the declines.
The collapse of Archegos had far-reaching consequences, impacting not only the fund itself but also the banks that had lent it money, including Credit Suisse, which suffered substantial losses as a result of the affair. The events surrounding Archegos have also led to increased scrutiny of the family office hedge fund model and the use of leverage in passive investing.
CS losses in 2021
The collapse of Archegos Capital Management significantly impacted Credit Suisse's financial results. Archegos was a large hedge fund that had significant exposure to various stocks through a complex network of derivatives contracts. When some of these stocks experienced sharp declines, it triggered margin calls that Archegos could not meet, leading to the unwinding of its positions and substantial losses for the banks that had lent it money, including Credit Suisse.
As a result of the Archegos affair, Credit Suisse reported a loss of $4.7 billion in the first quarter of 2021, significantly impacting its financial results for the year. The bank also announced plans to exit its prime services business, which was involved in the Archegos matter, and to strengthen its risk management practices. The impact of the Archegos affair highlights the importance of thorough risk management for banks and other financial institutions, particularly when it comes to complex and highly leveraged positions.
Most significant claims and scandals around Credit Suisse since 2020
Credit Suisse has faced a number of claims and legal actions over the past two decades from a wide range of parties, including individuals, organizations, and governments. Here's a quick rundown of some of the most notable cases:
Holocaust Era Claims: In the late 1990s and early 2000s, Credit Suisse, along with several other Swiss banks, faced claims from Holocaust survivors and their families for alleged complicity in the confiscation of Jewish assets during World War II. The claims were brought by individuals and organizations in several countries, including the United States, and although the exact amount of these claims is not publicly available, the Swiss banks agreed to pay a total of $1.25 billion to settle the claims in 1998.
Mortgage-Backed Securities Claims: In the wake of the 2008 financial crisis, Credit Suisse faced claims from investors who had purchased mortgage-backed securities from the bank. The investors claimed that the bank had failed to disclose the risks associated with the securities, leading to significant losses when the housing market crashed. The exact amount of these claims is not publicly available, but Credit Suisse agreed to pay several settlements, including a $536 million settlement in 2016.
Forex Trading Claims: In the aftermath of the forex trading scandal, Credit Suisse faced claims from investors who had been affected by the bank's manipulation of the foreign exchange market. The exact amount of these claims is not publicly available, but the bank agreed to pay several settlements, including a $536 million settlement in 2016.
Anti-Money Laundering Claims: The anti-money laundering claims against Credit Suisse were brought by regulatory authorities, who accused the bank of failing to properly monitor its client transactions for potential money laundering and other illicit activities.
These are just a few of the many claims and legal actions that Credit Suisse has faced over the years. Despite these challenges, the bank remains one of the world's most powerful and influential financial institutions, with a reputation for delivering the highest levels of service and expertise to its clients.
It all comes down to one name: Archegos. The collapse of this hedge fund was the main reason behind Credit Suisse's recent troubles.
Archegos Capital Management was a family office hedge fund founded by Bill Hwang, a former Tiger Management trader. The fund specialized in passive investing and had built up significant positions in several stocks using a combination of equity and derivatives.
In March of 2021, several of the stocks in which Archegos had invested experienced sharp declines, which triggered margin calls from the banks that had lent the fund money to finance its positions. When Archegos could not meet these margin calls, the banks were forced to unwind its positions, which led to substantial losses for the banks involved.
The exact reasons for the declines in the stocks held by Archegos are not entirely clear, but it is believed that a combination of factors, including broader market volatility, changes in regulatory rules, and company-specific news, may have contributed to the declines.
The collapse of Archegos had far-reaching consequences, impacting not only the fund itself but also the banks that had lent it money, including Credit Suisse, which suffered substantial losses as a result of the affair. The events surrounding Archegos have also led to increased scrutiny of the family office hedge fund model and the use of leverage in passive investing.
CS losses in 2021
The collapse of Archegos Capital Management significantly impacted Credit Suisse's financial results. Archegos was a large hedge fund that had significant exposure to various stocks through a complex network of derivatives contracts. When some of these stocks experienced sharp declines, it triggered margin calls that Archegos could not meet, leading to the unwinding of its positions and substantial losses for the banks that had lent it money, including Credit Suisse.
As a result of the Archegos affair, Credit Suisse reported a loss of $4.7 billion in the first quarter of 2021, significantly impacting its financial results for the year. The bank also announced plans to exit its prime services business, which was involved in the Archegos matter, and to strengthen its risk management practices. The impact of the Archegos affair highlights the importance of thorough risk management for banks and other financial institutions, particularly when it comes to complex and highly leveraged positions.
Most significant claims and scandals around Credit Suisse since 2020
Credit Suisse has faced a number of claims and legal actions over the past two decades from a wide range of parties, including individuals, organizations, and governments. Here's a quick rundown of some of the most notable cases:
Holocaust Era Claims: In the late 1990s and early 2000s, Credit Suisse, along with several other Swiss banks, faced claims from Holocaust survivors and their families for alleged complicity in the confiscation of Jewish assets during World War II. The claims were brought by individuals and organizations in several countries, including the United States, and although the exact amount of these claims is not publicly available, the Swiss banks agreed to pay a total of $1.25 billion to settle the claims in 1998.
Mortgage-Backed Securities Claims: In the wake of the 2008 financial crisis, Credit Suisse faced claims from investors who had purchased mortgage-backed securities from the bank. The investors claimed that the bank had failed to disclose the risks associated with the securities, leading to significant losses when the housing market crashed. The exact amount of these claims is not publicly available, but Credit Suisse agreed to pay several settlements, including a $536 million settlement in 2016.
Forex Trading Claims: In the aftermath of the forex trading scandal, Credit Suisse faced claims from investors who had been affected by the bank's manipulation of the foreign exchange market. The exact amount of these claims is not publicly available, but the bank agreed to pay several settlements, including a $536 million settlement in 2016.
Anti-Money Laundering Claims: The anti-money laundering claims against Credit Suisse were brought by regulatory authorities, who accused the bank of failing to properly monitor its client transactions for potential money laundering and other illicit activities.
These are just a few of the many claims and legal actions that Credit Suisse has faced over the years. Despite these challenges, the bank remains one of the world's most powerful and influential financial institutions, with a reputation for delivering the highest levels of service and expertise to its clients.
Will Credit Suisse goes bankrupt in 2023, and what to expect from the company's shares?
Warren Buffett, one of the world's most successful investors, has famously said, "Be fearful when others are greedy and greedy when others are fearful." This quote is often interpreted as advice to buy stocks when prices are low and sell when prices are high, as many investors tend to panic and sell their stocks during market downturns, leading to lower stock prices.
Another famous quote from Buffett is, "If you don't find a way to make money while you sleep, you will work until you die." This quote emphasizes the importance of investing long-term and having a diversified portfolio instead of trying to time the market or make short-term trades.
The situation with Credit Suisse is a rollercoaster ride that leaves many investors feeling dizzy. Some believe the bank will soon recover from its losses, while others think bankruptcy is just around the corner. It's hard to say which direction things will go, but one thing is for sure: the bank's property portfolio is its saving grace. Despite the seemingly concerning figures of the drop in share value, investors should not forget that the company's assets are reflected in the balance sheets.
Warren Buffett, one of the world's most successful investors, has famously said, "Be fearful when others are greedy and greedy when others are fearful." This quote is often interpreted as advice to buy stocks when prices are low and sell when prices are high, as many investors tend to panic and sell their stocks during market downturns, leading to lower stock prices.
Another famous quote from Buffett is, "If you don't find a way to make money while you sleep, you will work until you die." This quote emphasizes the importance of investing long-term and having a diversified portfolio instead of trying to time the market or make short-term trades.
The situation with Credit Suisse is a rollercoaster ride that leaves many investors feeling dizzy. Some believe the bank will soon recover from its losses, while others think bankruptcy is just around the corner. It's hard to say which direction things will go, but one thing is for sure: the bank's property portfolio is its saving grace. Despite the seemingly concerning figures of the drop in share value, investors should not forget that the company's assets are reflected in the balance sheets.
Warren Buffet
Actor
The outflow of 367 billion euros has undoubtedly taken its toll on Credit Suisse, but the bank is fighting back. It's important to remember that the bank's portfolio management cost ranges from 0.9-2.5% per annum and is not a small fee. The bank could have lost approximately EUR 7.3 billion just from its portfolio management alone! This means that in the future, there is a risk that the bank may divide its business into two parts - retail and its own banking and wealth management.
Access to updated company balance sheets is essential for fans of the value investment approach. They provide investors with a clear picture of the bank's financial health and the future of its shares. However, this text is just a personal point of view and should not be used as a call to invest or as a recommendation. All charts and images belong to their respective copyright holders.
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