Credit Sus

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What's going on?

Credit Suisse warned investors on Wednesday that its 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 dont earn anyone much goodwill. So its 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, its no wonder Credit Suisse is on a campaign to change things: the banks 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 dont pine after our Bank of America or HSBC bank clerks, so switching to another lender is normally a pretty painless affair. But thats 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 youve hooked them, they rarely jump ship. Thats why its so alarming that 10% of the bank’s stickiest clients’ cash has flown out the door this year, rivaling the hasty withdrawals made during 2008s 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 thats 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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