The BNP Attacked. Concern about the largest French bank? – Insolentiae


The BNP Attacked.  Concern about the largest French bank?  – Insolentiae
Written by madishthestylebar

This is an article from the Investing site which looks back on the concerns of the markets (and savers) regarding the health of the big banks, particularly European ones.

After Credit Suisse, it is the French giant of the banking sector that finds itself under pressure. Indeed, it was BNP Paribas stock that was shorted the most on Monday, with a total of $1.68 billion in bets against the bank’s shares, which corresponds to the highest percentage among the 17 banks for which data is available, according to data analytics firm S3.

Last week it was the title of Credit Suisse which was massacred on the stock market and the management of the large Swiss bank had to spend its weekend reassuring about the solvency of the establishment.

Investor concern over Credit Suisse has sent its shares tumbling in recent days, but short sellers appear to be interested in another bank.

Should we be worried?

The answer is yes and no, and it is important to remain objective and nuanced.

You have to look at the bank’s equity, its solvency ratios.

But to look only at that is not to take into consideration the potential risks of accident for example (and not randomly) on the derivatives markets with a position of these banks which could prove catastrophic in the event of an event extreme in the markets which is what we are experiencing with the energy crisis!

It also does not take into account the increase in the cost of risk with the fall of industry and businesses in Europe. But all the big banks obviously finance the economy. This is called the cost of risk.

If bankruptcies in the real economy increase, then the cost of risk, that is to say loans not repaid to banks, will also increase.

At the end of the day there will be a significant drop in profits and potentially if the crisis is as deep as it is long-lasting a possible capital problem. But that will happen later and it is a phenomenon that will materialize gradually in the next 12 to 24 months if it has to happen and we will see it in the study of the balance sheets of the banks that I monitor for my subscribers to the STRATEGIES letter.

We are not there.

A logical and predictable fall in prices

It is normal for banks’ share prices to be under pressure as the markets readjust their profit forecasts significantly downwards for banks. Less profits, less dividends therefore prices oriented downwards and sold short.

There is therefore nothing to be really surprised about.

Finally, if the situation were to really go wrong, a bank like BNP is a systemic bank, simply too big to fail, because if the public authorities drop a bank of this size, the whole European banking system will collapses.

So there is no need to start running in all directions. However, this should remind us of the necessary distribution of risks and the essential diversification of both your assets and your assets.

Those who are asking questions and want to go further, can subscribe for only 98 euros to my STRATEGIES Letter and you will have access not only to more than 85 files already published in addition to the next 12 months, but above all it will save you from doing stupid things that will cost you much more than 98 euros, because a bad investment is generally counted in thousands of euros of losses ! To invest in your wealth management and in the STRATEGIES letter, it’s here.

Prepare yourselves !

Charles SANNAT

“Insolentiae” means “impertinence” in Latin
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