Wednesday, December 2, 2015

Wait, is Credit Suisse a gold miner? Or are they supposed to be a bank?

WTF is this news from October:

Reuters - Credit Suisse to raise $6.3 billion in share offering.

You've got to be shitting me! I thought only crappy gold miners do dilutive share offerings!

Credit Suisse plans to raise 6 billion Swiss francs ($6.3 billion) from investors, slim down its investment bank and cut jobs as new chief Tidjane Thiam embarks on the biggest overhaul of the Swiss bank in almost a decade.

Credit Suisse is emphasising wealth management and growing in Asia, echoing moves by rival UBS. It joins rivals including Barclays and Deutsche Bank as well as UBS in scaling back investment banking as tougher regulations squeeze profitability.

Thiam, 53, hired from insurer Prudential, also said he will float shares in Credit Suisse's domestic Swiss bank and cut 2 billion francs in annual costs, giving his vision for Switzerland's second-biggest bank almost four months into the job.

He is raising cash to bolster the bank's capital position, which is one of the weakest in the sector. Thiam said the decision had gone down well with regulators in a meeting.

Seriously? This raises some interesting questions:

1. Why the hell is your capital position so terrible?

2. Aren't all your costs, including the $2B that Thiam is cutting, supposed to be covered by earnings? I mean, you're a fucking bank. You take deposits, lend them out, and collect your vig. How the fuck hard is this? You having trouble mastering the business of being a fucking bank? Royal, TD/Canada Trust, Scotia and BMO have no fucking problem turning a profit every year, year in and year out, whether boom or recession; why is it so difficult for you guys? Is it just that the Swiss are fucking terrible with money?

3. If you really need capital so much, why not borrow the $6B? Haven't you heard that borrowing rates are at a millenial low? Why not issue a bond? I mean, maybe if you were a grossly unprofitable fucking clowncar of a company like the average gold miner, where you were pretty sure you were never going to turn a profit again, then I could understand why you would prefer dilution; but a bank? Isn't there a lineup of people out there who'd love to lend $6B to a bank at, say, a 2% coupon for 10 years? Y'know, with the global savings glut and all?

Message for Tidjane Thiam: if you want help deciding who to lay off, I have four words for you. Mandatory random drug testing.

No comments:

Post a Comment