Credit Suisse Group AG (CSGN) and Saxo Bank A/S joined an increasing number of European financial companies warning that the Swiss central bank’s surprise decision to abolish its currency ceiling may dent earnings.
Credit Suisse, Switzerland’s second-biggest bank, indicated Monday that currency swings may hurt profit. Denmark’s Saxo Bank said some clients might not be able to settle unsecured amounts, which might cause undisclosed losses.
The full force of the decision won’t be known for months and is “closer to a nuclear explosion than a 1,000-kilogram conventional bomb,” Javier Paz, senior analyst in wealth management at Aite Group, said in an e-mail Tuesday. “The aftermath is like a black hole that can suck massive amounts of credit from currency trading as we have known it.”
Citigroup Inc. (C), Deutsche Bank AG and Barclays Plc (BARC) suffered about $400 million in cumulative trading losses, people familiar with developments said last week. At Morgan Stanley (MS), owner of the world’s largest brokerage, Chief Financial Officer Ruth Porat said the effect was minimal.
Thomas Peterffy, the billionaire chairman and chief executive officer of Greenwich, Connecticut-based Interactive Brokers Group Inc., said that he expects banks’ losses from the currency swings to increase as customers can’t repay loans. Interactive Brokers disclosed on Jan. 16 that it could suffer as much as $120 million in losses from clients who got the Swiss franc trade wrong. Peterffy said leverage may increase the losses at banks.
Alpari (UK) Ltd., a foreign-exchange broker, has gone into administration after failing to find a company willing to buy it out. FXCM Inc. (FXCM) the largest U.S. retail foreign-exchange brokerage, had to get a $300 million cash infusion after losses threatened its ability to comply with capital rules.
Full article: Swiss Franc ‘Nuclear Explosion’ Spreading, Credit Suisse, Saxo Hurt (Bloomberg)