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At 50X Leverage And 2% Tier 1 Capital, Is Socgen Truly F*****?

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http://www.zerohedge...t-invincibility

' As the attached table created by Jean-Piette Chevalier demonstrates, SocGen is back at the leverage it had back in 2007 at just over 50x. As a reminder, not even Lehman was this bad when it blew up (and that excludes the beneficial boost from Repo 105). In other words, SocGen has a Tier ratio of 2.0%... a number which the bureaucrats at Basel will have no choice but tell the bank must go up. And go up it will... assuming SocGen can issue €84 billion in new capital to pad its equity (on €19 billion of market cap... mmhmmm). Of course, in order to raise capital, SocGen would have to admit that the market was, in fact, correct in its assessment that the bank was undercapitalized, which would then send the stock even lower, and so forth, chicken or egg style. While we doubt any of this is new to the market, we doubt the response will be one of buying euphoria. Luckily, the only thing that can send the price tumbling now is actual selling, as opposed to shorting. And as we all know, nobody could possibly sell stocks: after all it is simply the evil shorters who are responsible for every market collapse in history, never the long idiot money which never did its homework, and suddenly becomes the last bagholder standing and first to bail from what is obviously a disastrously bad investment.'

'Indeed, the French bank counts in its equity item 2: Equity instruments and associated reserves which are actually different forms of liabilities related interests subject to some conditions.

Equity published in item 1: Sub-total equity, Group share should be reduced by Equity instruments and associated reserves (item 2) to determine the true equity at fair value (item 3) i.e. 22,535 billion of euros.

Total liabilities are equal to total assets (item 4) less the true equity at fair value (item 3): 1,135.473 billion of euros.'

not that I'm an expert on bank balance sheets beyond anything but the basics ie if it's stacked up like it is on wiki then I'm alright.

doesn't look good hey?one little greek haircut might be enough to send them under.anyone know their exposure there?

edit to add remember reading a john mauldin piece a few years back saying that the swiss banks were leveraged at 50+.they've survived thus far.

50 to one....when nanmks in the Uk were stressed with capital ratios of 8:1.

This means that socgen are extremely vulnerable to insolvency.....in banking measures that is.....they only need 2% of loans to go bad.

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if those figures are right then 2% impairment across the board and it's 'hello cash call old friend'.

nah, they are probably lying about the valuations already...theres probably 100:1 leverage.

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Oh no another zerohedge cut and paste job...

Sorry just realised I'm not the HPC thought police.

Soc Gen look well and truly screwed. I'm betting we'll limp on to Sept/Oct when these collapses always seem to happen.

I bet the French hope someone else blows up first, which I feel has been the aim of the game all along. No one wants to be the one that starts the nuclear chain reaction.

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Oh no another zerohedge cut and paste job...

Sorry just realised I'm not the HPC thought police.

Soc Gen look well and truly screwed. I'm betting we'll limp on to Sept/Oct when these collapses always seem to happen.

I bet the French hope someone else blows up first, which I feel has been the aim of the game all along. No one wants to be the one that starts the nuclear chain reaction.

If memory serves there were plenty of rumours circulation in 07-08 about them (2-3 away from the firing line?) but back then there were even bigger muppets in circulation who got wiped out.

Revaluing "assets" only works for so long. For me this Soc Gen is about sorting out stuff swept under the carpet (+ Jerome Kerviel :o)

Remember there is more to capital than just tier 1.

It explains why French government was so worried about Basel 3 @ 7% and stricter definitions ;)

Having dealt with a number of French banks their capital structures won't be helped by the kind of business models they have (or had)

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aye,don't know what some people are doing on a discussion forum IRRO.I'm not saying they're (ZH) on the moeny all the time and don't have an agenda,but they are one of the few outlets that'll publish the unpublishable.

i think IRRO was a bit put out you sat in on his newsreader job. It was unexpected.:D

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Bumper bonuses at soc gen all round I say!

They need to do that to retain the world class talent.

To be honest they deserve massive remuneration for working for a froggy outfit, you wouldnt be able to pay me all the money in the world to lower my standards so far, there are always limits on how much one is willing to compromise their standards

Edited by Mary Cassatt

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Plenty of Soc Gen employees in London, and there is an infestation of the French around South Ken.

Because there is a French Lycee there.

The French main TV news had a SocGen Q&A the other night, it read like a comedy sketch for Bird and Fortune

Q: so how safe is your money with SocGen?

A: oh very very very safe, safe as houses old chap

Q: If SocGen went bust could you still withdraw money from the cash machines

A: Yes, absolutely no problem at all, the cash machines would continue working and you'd be able to withdraw money from other banks too!

etc etc.

I can't believe for a second that you'd still be able to withdraw cash but still. Quite a few people have been shutting their accounts in France but no mention of that on the news.

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If memory serves there were plenty of rumours circulation in 07-08 about them (2-3 away from the firing line?) but back then there were even bigger muppets in circulation who got wiped out.

Revaluing "assets" only works for so long. For me this Soc Gen is about sorting out stuff swept under the carpet (+ Jerome Kerviel :o)

Remember there is more to capital than just tier 1.

It explains why French government was so worried about Basel 3 @ 7% and stricter definitions ;)

Having dealt with a number of French banks their capital structures won't be helped by the kind of business models they have (or had)

You mean luckily for them there was RBS and HBoS in front....

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http://www.independent.co.uk/news/business/news/sarkozy-set-to-clash-with-merkel-over-euro-bonds-2337768.html

Another attempt to end the eurozone debt crisis and persuade the German chancellor Angela Merkel to accept eurozone bonds – pooling all the existing nations' national debts – will be made by President Sarkozy at a crisis summit on Tuesday.

It comes against a backdrop of worried investors throughout the world despairing at the lack of political leadership being shown in the world's various sovereign debt crises. Second-quarter growth figures are announced for the eurozone this week. City analysts predict a modest 0.3 per cent average growth – despite Germany's continued strong performance.

No wonder Sarkozy is trying to push this through.

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Explains why the ECB has been buying up tens of billions of bonds in the past week - probably mostly Soc Gen stuff?

If Soc Gen goes then France will no longer be seen as a bailer but a bailee. End of Euro.

I think this will all go tits up before Oct resulting in a massive stock market crash. If they print then there will be riots across Europe as people cannot afford to eat or heat their homes.

Endgame.

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I think this will all go tits up before Oct resulting in a massive stock market crash. If they print then there will be riots across Europe as people cannot afford to eat or heat their homes.

I'm not worried, the council have just put another layer of insulation in the roof! I'm sitting here in a T-shirt! Okay it's August but still.....

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