Credit Suisse, Sabadell… how mean it is to single them out

credit suisse

The banking tsunami generated by the collapse of SVB and Signature Bank – which the Fed wants to close by offering to buy bonds at par, not at market price, from banks in need of liquidity – threatens to turn into a financial crisis. That is the threat today from markets that are out for blood to stop interest rates rising.

The big European banks, such as Santander and BBVA, which had risen 30% in little more than three months, have lost 15% in seven days, but the markets know how to smell the weakest and Sabadell, which fell more than 10% on Monday and by the same amount on Wednesday, seems to be attracting speculators bent on taking their toll.

Sabadell recognises in its balance sheet that the “Changes in the fair value of hedged items in a portfolio with interest rate risk hedging” meant losses of €1,545 million at the end of 2022, a year in which with a balance sheet of 250,000 million (just over 10%, some 27,000 million, in bonds) it earned just over 800 million.

The rate hikes, which in December were far from over, made 2022 a bad year for almost all assets, and certainly for fixed income, which reaped heavy losses, in double digits in many cases.

The SVB took more than $1.8 billion in losses, having to sell $21 billion worth of bonds to meet liquidity demands. Almost any institution in the world – including, of course, insurers, which are the largest holders of debt in much of the continent – would now have huge losses if it were forced to sell and could not wait for those securities to be redeemed.

Pointing the finger at Credit Suisse or Sabadell, or… is meaningless if it is not with the intention of forcing their downfall, something that is as possible as it is absurd.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.