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What's going on?
Credit Suisse warned investors on Wednesday that it’s bracing for another dizzying loss this quarter.
What does this mean?
Credit Suisse was probably hoping to hold onto customers while its “strategic overhaul” gets underway, but bold blueprints alone don’t earn anyone much goodwill. So it’s a kick in the Swiss lender’s teeth that massive withdrawals by its wealthiest customers are set to see it chalk up a $1.6 billion loss this quarter. And given that blow follows a $4 billion hole the quarter before, it’s no wonder Credit Suisse is on a campaign to change things: the bank’s now hoping to drum up cash from new and existing shareholders, and is lining up a whole 9,000 jobs on the chopping block.
Why should I care?
For markets: Running from the bank.
Most of us don’t pine after our Bank of America or HSBC bank clerks, so switching to another lender is normally a pretty painless affair. But that’s not the case when it comes to private banking at the likes of Credit Suisse. It might take a lot of schmoozing to win prize punters, sure, but once you’ve hooked them, they rarely jump ship. That’s why it’s so alarming that 10% of the bank’s “stickiest” clients’ cash has flown out the door this year, rivaling the hasty withdrawals made during 2008’s financial crisis. Credit Suisse has a textbook crisis of confidence on its hands, then, and needs to restore trust pronto.
The bigger picture: Not life or death… yet.
Regulators make banks keep a certain amount of cash in their coffers so they can cope with losses when times get tough, a rule that’s only tightened since the days of the financial crisis. That means that while Credit Suisse desperately needs to win customers’ confidence, cut costs, and raise funds, the firm should be padded with enough cash to keep it moving for now.
Originally posted as part of the Finimize daily email.
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