To The Moon

I saw a friend in my circle of friends asking$Credit Suisse Group AG(CS)$Is it the next one$SVB Financial Group(SIVB)$? Can you bargain-hunting and bet on a rebound?

I personally don't recommend this, In fact, if you look at the financial reports of the two companies carefully, you will know that the situation of these two companies is quite poor. If we look at the financial situation of Silicon Valley banks, in fact, there are no major problems in recent years. The explosion of Silicon Valley banks has its particularity, and its customers are concentrated in the fields of science and technology, life sciences, health care and venture capital. After the American technology industry is "no longer beautiful", the risk exposure of Silicon Valley banks is accelerated.

The plight of Silicon Valley banks is a typical asset-liability mismatch.Banks of the United States are generally under pressure in the wake of the Fed's most aggressive rate hike process in 40 years. After the COVID-19 pandemic in 2020, the large-scale easing policies adopted by the Federal Reserve and the Ministry of Finance led to the rapid growth of M1 and M2 in the United States, and the liabilities of commercial banks expanded greatly. At the end of 2021, the deposits of commercial banks in the United States increased by 36% compared with the end of 2019, while the annual growth rate of total loans of commercial banks was only 8.7%. In this case, commercial banks with no more choices can only invest a large amount of cash deposits in low-yield securities under the low-interest environment at that time.

In addition, structurally, during the period of low interest rate "asset shortage", commercial banks tilted towards long-term strategy.Although a higher proportion of long-term assets helps banks maintain net interest margins during periods of low interest rates, it has led to large losses on commercial banks' books at a time when interest rates are rising. More importantly, with the tightening of monetary policy by the Federal Reserve, the maturity spread of US bonds has entered a deep upside-down, which poses a challenge to the profit model of commercial banks.

Credit Suisse is more like a pile of rat droppings. Before the bankruptcy of Silicon Valley banks caused turmoil, Credit Suisse was already in a "vortex". In 2021 and 2021, Credit Suisse suffered a "double crit" from Archegos Capital's explosion and Greensill Capital's collapse, which caused the company to suffer billions of dollars in losses and forced its investment banking director and chief risk officer to leave. In addition, Credit Suisse was convicted in the lawsuit of helping drug dealers launder money, becoming the first large bank in Swiss history to be convicted in a criminal case. If you look at his financial statements, you will know that he has lost money year after year

Credit Suisse recently acknowledged "material deficiencies" in its reporting and control procedures over the past two years. Meanwhile, on the 13th local time, Credit Suisse Group's bond default insurance cost has climbed to the highest level in history. The chairman of Saudi National Bank, the largest shareholder, said that due to regulatory problems, he could not hold more than 10% of Credit Suisse, so he could not provide more funds to Credit Suisse.

I feel that bargain hunting is taking millet from the fire now. What do you think?

In addition, the bank is still trying to solve the problem of executive loss. Since September last year, at least a dozen senior executives at the level of general manager and above of Credit Suisse in Singapore and Hong Kong, China have planned to leave or have left, "which makes the plan of asset recovery more complicated".