Credit Suisse

We’ve been on the road, this past week, so blogging has been a touch “light on”.

We’ve seen the graphs that killed Silicon Valley Bank, and Signature bank. Mark to market losses on the hold to maturity book, by running a big unhedged asset liability mismatch, more than 90% of deposits uninsured, and concentrated amongst of flighty, suffering, VC and tech firms.

Credit Suisse seemed to catch some unawares (certainly the AT-1 CoCo’s getting zeroed out ahead of equity).

But even a cursory glance at the CS history reveals much. We’ve thought it was going bankrupt each year every year for many years.

Shrinking to attempted greatness, shedding toxic assets, embroiled in never-ending scandals. The basic (though sometimes wrong) idea is that scale begets competitive advantage and returns, in banking, here it is in reverse.

Recall the massive exposure to the Archegos (Bill Hwang’s Private Office fund, borrowing capital to buy tech/VC companies, a little like Cathy Wood’s ARC, that didn’t work out) or to the Lex Greensill Credit Suisse commercial paper debacle. Billions of dollars lost.

The history of losses, one-offs, and abnormal items is really a sight to behold.

CS was essentially a company in “perennial restructure mode”, desperately trying to find the right model.

Depositor flight in the final moments may well have been what “killed it”, but the run up to the loss of confidence took time, and was assuredly steady.

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