The Banking and Strategy Initiative

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European Banks recapitalization: HSBC warns of Euro dangers, US Banks continue bad year

G20 London protests, police outside HSBC Bank.

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Our key constitutency , the banks have been closer allies of the governments in Europe than the obvious faultlines in the US. That might yet be why, European Banks like the French triad may fall into a deeper hole very soon


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French Banks, exposed to EUR 417 bln or  $543 bln in Italian sovereign debt alone. Emerging markets emperor HSBC on the other hand or even German Deutsche Bank have a more hands off arrangement with their national regulators , bordering on a fight as HSBC seeks to exit UK domicile over Tobin tax, new super regulators and other such tweaks and turns incl the entire ring fencing circus which even redefines their business model to an almost staid expense plus NGO business, bordering on reporting surpluses on its retail businesses without investments. If Credit Suisse and BNP deleverage to their fulle xtent, (20% of March Balance sheet and more) and if DB and HSBC like other G-Sifi institutions with the stamina back out of Europe now ( euphemism for any deleveraging, you would be exiting all Europe Risk)  and not take new positions in the TRaidng book there is precious little money to go around in the Euro -economy.

HSBC right now has only $5.5 billion of GIPSI exposure, and together DB and HSBC only booked $220 mln and $171 in losses on their Greek holdings after marking them to market in September

BNP has already exited nearly $75 bln on its book and Credit Suisse is in the process of reducing its Market trading book by a good $200 bln. BNP would need to exit another $75 bln and at least $ 20 bln would be Italian debt currently trading at 7% yields (2,5 and 10)  — Stamina courses from Portugal and Ireland hold a 15-45 day limit for survival of Italy in this range

Meanwhile US Banks are also rudderless after a 20-40% downtick in trading revenues and as analyst Mike Mayo mentioned  yesterday..It is the worst year for revenue since 1938.

MF Global failed on just $6 bln of exposure, Jeffries points out fervently that it has much less exposure ( thanks @zerohedge)


Check out others in the European Banks series’

Logo of Credit Suisse First Boston. Source: ht...

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a. European Banks Recapitalization: Splitting the Eurozone ( French vs German options )

b. European Banks recapitalization: Italy falls?

c. European Bank Results Season: HSBC reports $14.4 bln profit (before tax) 

d. European Banks recapitalization: Berlusconi close to leaving, coalition to rule Greece

e. It happened one night..

f. European Banks recapitalization: Really, to wait for a Greek referendum



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