There is always one in the group which tends to underperform even though it has some wonderful assets. In the world of global banking, the underperforming bank for the moment is Credit Suisse which is one of the largest banks in Europe and one of Switzerland’s global systemically important banks. On the strength of the last two characteristics, investors could easily analyze the bank and determine it to be a buy and hold situation.
In an article from Reuters there is a however, the bank has been hit by a string of troubles. It had to raise capital, halt share buybacks, cut its dividend and revamp management after losing $5 billion from the Archegos collapse and failed financer Greensill. The good news is both Swiss regulator FINMA and the Bank of England in London where Credit Suisse has major operations, have noted there are no major recent developments in bad credit.
In the banking world, there is always a bank which either wants to be a leading bank or lends too much money to a group that when markets turn or cycles turn down, they move from profits to write downs.
Linking to dividend paying stocks, often investing in a bank is similar to investing in a utility because they are large enough in size the government seems to have their backs, if write downs are too much. If you can avoid owning the bank shares and not losing your money the other banks perform similar to utilities. Not every company in the sector is the same, there are differences and even though the business model is simple for banks – lend or give credit and receive interest and your money back, sometimes the lenders forget about receiving the money back, they love booking the loans and receiving a few interest payments for their bonus payments. Ask how are bonuses received when a lender misses payments?
There are more questions than answers, till the next time – to raising questions.