Market strategist Greg Foss has predicted that Credit Suisse will be the next big bank to fail, citing capital problems and a run on the bank. The Swiss banking giant has also identified “material weaknesses” in its financial reporting controls. Its shares plunged on Wednesday after the bank failed to raise capital from its biggest investor.
Credit Suisse set to fall, says strategist
Market strategist Greg Foss warned of the impending collapse of Swiss banking giant Credit Suisse on the Coin Stories podcast, published on Tuesday. His warning followed the collapses of several major US banks, including Silicon Valley Bank and Signature Bank.
Foss is currently the CEO of Validus Power Corp. He was a founding shareholder of 3iQ Corp. and previously served as a senior portfolio manager with a focus on credit strategies at Fiera Quantum. He was also a managing partner for credit strategies at both GMP Investment Management and Marrett Asset Management, and was vice president of fixed income transactions at TD Securities.
“Credit Suisse is a systemically important financial institution and there is a run on the bank,” Foss began, explaining:
The wealth division is losing assets magnificently and that’s a key earnings driver for the bank, and it’s essentially a run on the bank.
Credit Suisse is one of 30 banks identified by the Financial Stability Board (FSB), in consultation with the Basel Committee on Banking Supervision and national authorities, as global systemically important banks (G-SIBs). Other banks on the latest G-SIB list include JPMorgan Chase, Bank of America, Citigroup, HSBC and Goldman Sachs.
“If CSFB (Credit Suisse First Boston) gets into trouble, it’s not just about CSFB, it’s about every other institution that has exposure or counterparty risk,” he warned. In 1988, Credit Suisse acquired First Boston, a well-known investment bank at the time.
Responding to a question about why he thinks Credit Suisse will be the next big bank to fail, Foss explained:
Because he’s in big capital trouble. It only has a $10 billion market cap for about a trillion dollars in assets, which is ridiculously low.
The strategist noted that Switzerland’s second-largest bank claims it has met the standards set by the Bank for International Settlements (BIS), but noted that the BIS’s capital standards are not set for the market.
On Wednesday, Credit Suisse shares slumped after its biggest investor, the Saudi National Bank, revealed it could not provide any more financial assistance to the Swiss bank. “We cannot because we would go above 10%. It is a regulatory problem,” said Saudi National Bank President Ammar Al Khudairy.
Credit Suisse released its 2022 annual report on Tuesday, saying it had identified “material weaknesses” in financial reporting controls. The report explains that the “bank’s management did not design or maintain an effective risk assessment process to identify and analyze the risk of material misstatement in its financial statements.”
As of this writing, Credit Suisse Group shares are trading at $1.92, down nearly 24% from Wednesday. The stock is down more than 97% from its all-time high.
Do you think Credit Suisse is about to go under as market strategist Greg Foss warned? Let us know in the comments section.
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