Raphael Stevens

More stories

  • 125 Shares119 Views

    in Business

    Space companies Spire and Momentus get stock exchange delisting warnings

    Spire and Momentus received delisting warnings on Friday, according to securities filings, as both ventures’ stock prices stood below $1 a share.
    The companies have 180 days, or about six months, to get their stock prices back above $1 a share.
    Both companies noted the possibility of conducting a reverse stock split to regain compliance with exchange standards.

    Spire Global at the New York Stock Exchange, August 17, 2021.
    Source: NYSE

    A pair of space companies received delisting warnings on Friday, according to securities filings, as both ventures’ stock prices stood below $1 a share.
    Small satellite builder and data specialist Spire Global received a notice from the New York Stock Exchange, while spacecraft delivery company Momentus received a notice from the Nasdaq.

    related investing news

    7 hours ago

    Under the respective exchanges’ compliance rules, the companies have 180 days, or about six months, to get their stock prices back above $1 a share.
    Spire’s stock closed at 69 cents a share on Friday, having first slipped below $1 a share on Mar. 7.
    Momentus’ stock closed at 63 cents a share, slipping below $1 a share on Feb. 7.

    Sign up here to receive weekly editions of CNBC’s Investing in Space newsletter.

    Both companies noted the possibility of conducting a reverse stock split to regain compliance.
    Spire debuted on the public markets in August 2021, after completing a SPAC merger. The company hit $100 million in annual subscription revenue, it announced during its Q4 results, and has continued to shave its losses as it aims to be free cash flow positive in about a year.

    Momentus also debuted in August 2021, following its own SPAC merger. After a turbulent leadership changeover, the company has struggled to ramp up its spacecraft platform business. In Q4, it saw minimal revenue, but hopes to fly multiple missions this year.
    The warnings come as fellow space company Astra seeks an extension from the Nasdaq to regain compliance after it received a delisting warning last year.

    WATCH LIVEWATCH IN THE APP More

  • 113 Shares149 Views

    in Finance

    After Credit Suisse’s demise, attention turns to Deutsche Bank

    In recent weeks, euro-zone investors have experienced a sense of disbelief. Could banking turmoil really stay confined to America and Switzerland? On March 24th, as European bank stocks slumped, the disbelief faded. By the end of the day Christine Lagarde, president of the European Central Bank, had commented that Europe’s banks were safe and liquid enough to withstand market scrutiny. The sell-off started with Deutsche Bank, a German lender that has, over the years, been dogged by trouble. Its credit-default swaps, tradable insurance against defaults on a bank’s debt, jumped to near-record levels. In response, investors dumped the firm’s shares, which fell by 14%. Fear spread. By mid-afternoon the Euro Stoxx 600 banks index, which contains the region’s biggest lenders, had lost 5%. After the collapse of Credit Suisse, which ended in a tie-up with ubs on March 19th, investors wondered if another fateful weekend lay ahead.How bad do things look for Deutsche Bank? Start with the immediate comparison between it and Credit Suisse. The 300km separating Frankfurt from Zurich is not the only thing that sets the two institutions apart. The Swiss bank was unprofitable and faced enormous legal strife. But what really made Credit Suisse a prime candidate for a lightning-fast bank run was that nearly all its deposits were uninsured. By contrast, after a prolonged and painful restructuring, Deutsche Bank is profitable. Some 70% of its retail deposits are insured and firms that park cash with it are sticky, too. In 2016, when a mix of poor results, probes and scandals shook the bank, deposits barely budged. Should push come to shove, the lender has plenty of high-quality, liquid assets it could exchange for cash at the European Central Bank. The Credit Suisse scenario, of a self-propelling bank run, seems unlikely.There are, however, other threats. These include rising interest rates, which were what brought down Silicon Valley Bank (svb). Rate rises are good for banks in the short run, since income from interest increases. Indeed, Europe’s banks have posted bumper profits. Deutsche Bank’s net profits of €5.7bn ($6.1bn) in 2022 were double those of the year before.But as the cost of funding increases, banks’ assets, such as long-term bonds, lose value. Luckily for Deutsche Bank, European regulators have demanded lenders hedge this risk. Last year the European Central Bank reported that net duration risk—how much banks lose if rates rise—was a low share of local banks’ regulatory capital. According to Autonomous Research, a firm of analysts, even if Deutsche Bank’s risk is on the high end, it does not pose much danger. Another worry is about fallout from svb affecting Deutsche Bank’s American portfolio. Commercial property looks set to suffer as mid-sized lenders tighten the credit taps. Deutsche Bank owns nearly $17bn of such assets, ranking it among the most exposed European banks. But the lender’s commercial-property portfolio, which is well diversified, carries limited debt and is equivalent to just 35% of its high-quality capital. Deutsche Bank may have a large book of derivatives, which are dangerous instruments in volatile markets, but these are traded openly and often enough to make it unlikely they are severely mispriced. Perhaps the biggest cause for concern is Deutsche Bank’s cost of funding, which may rise in the wake of Credit Suisse’s demise. Although Deutsche Bank has more capital than Europe’s tight rules require, investors in Additional-Tier 1 (at1) bonds, who were wiped out in the ubs takeover of Credit Suisse, will now demand higher premiums. And at1s count for a higher share of Deutsche Bank’s risk-weighted assets than at other banks. Yet the main reason for the sell-off is not a dreaded skeleton in Deutsche Bank’s closet. Instead, it is the sort of “uncertainty that produces overreactions to weak signals”, says Corrado Passera, a European-banking veteran. The market for Deutsche Bank’s credit-default swaps is illiquid, meaning a few trades can move prices fast. After a weekend that saw investors lose their shirts, traders will have wanted to sell anything remotely risky in order to enjoy a few days’ peace. ■ More

  • 188 Shares139 Views

    in Business

    Rocket Lab targets $50 million launch price for Neutron rocket to challenge SpaceX’s Falcon 9

    Rocket Lab is targeting a $50 million launch price for its coming reusable launch vehicle called Neutron, to challenge Elon Musk’s SpaceX.
    “We are positioning Neutron to compete directly with the Falcon 9,” Rocket Lab Chief Financial Officer Adam Spice said.
    In the meantime, Spice said Rocket Lab looks to maintain its position as “a dominant player” in the market sub-sector of launching small satellites with its Electron vehicles.

    Rocket Lab

    Rocket Lab is building a bigger, reusable launch vehicle called Neutron, and it’s targeting a price point near $50 million per launch to challenge Elon Musk’s SpaceX.
    “We are positioning Neutron to compete directly with the Falcon 9,” Rocket Lab Chief Financial Officer Adam Spice said earlier this week, speaking at a Bank of America event in London on Tuesday.

    The company announced Neutron when it went public in 2021, with Spice saying the rocket remains on track to debut in 2024. During its fourth-quarter report last month, Rocket Lab said it had begun producing the first tank structures of Neutron, as well as construction of the launch pad for the rocket. The company plans to conduct the first “hot fire test” of an Archimedes engine, which will power Neutron, “by the end of the year,” Spice said.

    Sign up here to receive weekly editions of CNBC’s Investing in Space newsletter.

    SpaceX advertises a Falcon 9 launch with a $67 million price tag, and Spice says Rocket Lab is aiming to match that on a cost-per-kilogram basis for satellite customers. That means Neutron is targeting a “$50 million to $55 million launch service cost,” Spice said.

    Rocket Lab

    Spice also noted that Rocket Lab expects to fly the reusable Neutron boosters “10 to 20 times” each, in range with the current reuse performance of a Falcon 9 booster.
    “We ultimately expect the margins to be in around the 50% range” for Neutron launches, Spice added. He estimated the cost of goods for each Neutron to be at $20 million to $25 million, with “close to half of that” coming from the upper, non-reusable second stage of the rocket.
    Additionally, with SpaceX pushing hard to develop its massive Starship rocket, Spice alluded to the potential for the company to pivot away from flying Falcon 9 missions.

    “We don’t have any hard data on that but certainly, if that was to happen, that’d be an incredibly bullish thing for Neutron,” Spice said.
    In the meantime, Spice said Rocket Lab looks to maintain its position as “a dominant player” in the market sub-sector of launching small satellites with its Electron vehicles. The company expects to launch three Electron missions in the second quarter, with two already completed, and is “on track” to launch 15 missions this year, Spice said.

    More than rockets

    Spice also emphasized to the Bank of America audience that Rocket Lab is “much more than” just a rocket company. Indeed, the company’s acquisitions and expansion into building satellite components and spacecraft has become the bulk of its quarterly revenue.
    “All of this leads towards the biggest opportunity in space, which is really on the application side,” Spice said.
    As CEO Peter Beck has previously noted, Rocket Lab aims to create an “end-to-end platform for customers” who need space-based services. Spice said the company wants to be operating satellites and “delivering data to our customers and developing a recurring revenue stream from that,” essentially eliminating the need for other companies to build and operate their own satellites.
    “A lot of the companies that we’re [launching to orbit on Electron] now are very unnatural owners of space assets,” Spice said, adding that “the best owner of a space asset is somebody who can launch.”

    WATCH LIVEWATCH IN THE APP More

  • 163 Shares189 Views

    in Business

    Secondhand resale is getting cutthroat as platforms such as Depop and Poshmark boom

    The consumer culture on indie reselling platforms has shifted as more sellers compete to capture demand and more inflation-weary customers hunt for deals.
    Negotiations, bidding wars and upselling items have become more common on digital marketplaces like Depop and Poshmark.
    Big retailers like Target and H&M have been trying to get in on the hand-me-down action by launching partnerships with online thrift store ThredUp.

    The Depop application on a smartphone arranged on Wednesday, June 2, 2021.
    Gabby Jones | Bloomberg | Getty Images

    Six months after launching his secondhand clothing shop on digital marketplace Depop in 2020, Blake Robertson, a 15-year-old high schooler at the time, received a death threat from a customer.
    It came via Instagram, from someone who had not received her purchase in time for Christmas.  

    “Nothing happened, but I don’t know, it just opened my eyes to the fact that some people, they just really want their items,” said Robertson.
    Demand for secondhand resale has been booming since the early days of the pandemic, generating a culture shift within the indie marketplaces where it all began. Customers, many of whom have been feeling the squeeze of inflation, are fiending for lower prices, leading to more heated negotiations and occasionally ruthless bidding wars.
    Meanwhile, independent resellers are turning their one-time hobby into a job, sometimes even upselling items to take advantage of demand spikes. Users on platforms like Depop and Poshmark set up online shops to list vintage, secondhand or unique items for sale and generate notable followings of loyal shoppers.
    Robertson is now 17 and says the growth of resale has allowed him to turn his Depop shop, which now has over 19,000 followers, into a part-time gig. He told CNBC he juggles the hustle of reselling with his high school studies.

    Blake Robertson, 17, poses with his closet, some of which is up for resale on his Depop shop.
    Courtesy: Blake Robertson

    He’s become accustomed to the occasional hate message or days-long negotiations over a single item. More than anything, he has been pleasantly surprised by the growing reach of his shop, which used to just serve his friends as patrons.

    “I get these messages from total and complete strangers, which just makes me think how much this app genuinely has grown,” Robertson said.

    The back and forth

    To be sure, death threats against resellers are not the norm. Beaux Abington, 49, says that overall, she’s had “really fantastic, phenomenal customers.”
    But she’s also noticed more buyers hunting deals, and has felt insulted by recent offers for her products that are sometimes less than half her asking price.
    “There’s definitely a price-consciousness that wasn’t always there,” said Abington.
    About 53% of people polled in an October 2022 Depop survey of over 2,000 U.K. consumers said that they have been turning to secondhand shopping more in order to save money as living costs rise. The result, sellers say, is more frequent negotiations and intensified bidding wars.
    “There’s a lot more negotiation happening. Even in the last year, I’d say it’s kind of skyrocketed for me,” said Josefina Munroe, 27, a Depop seller with over 30,000 followers. She started her shop five years ago and decided to make it a full-time job after she graduated college in 2020 and demand for online resale expanded.
    Then there are the de facto bidding wars. Munroe recalls purchasing an item on Depop, only to have the seller cancel her order after realizing that another customer was willing to pay more. Other Depop shoppers say that is not an uncommon experience.
    “It’s completely separate from real-world shopping because that would never happen in a store,” said Munroe. “I think people have gotten very comfortable with the whole back and forth.”

    Arrows pointing outwards

    Beaux Abington, 49, models some of her own Depop items.
    Courtesy: Beaux Abington

    Platforms like Depop and Poshmark are leaning into the competitive consumer zeitgeist.
    Last January, Depop launched a new “Make Offer” option – a feature that has streamlined the negotiation process, which used to take place informally via direct messages. Resellers say that the new button has made customers more comfortable haggling.
    “The offer feature on Depop has definitely created a new dynamic in terms of being hounded with low-ballers and also being expected to sell things cheaply,” said Pascale Davies, 28, who runs a Depop shop with 59,000 followers.
    But Depop has yet to institute a formal function for bidding battles — like the original reseller, eBay, offers. Depop also shut down comment sections on product pages where customers used to ask questions and sometimes get in arguments, according to users.
    “We found that comments on an item did not directly help buyers with their decision-making,” a Depop spokesperson told CNBC when asked about the change.

    Going bigger

    In September, Poshmark launched “Posh Shows,” which allows sellers to hold livestreamed auctions to sell and promote their inventory.
    Stephanie Dionne, 44, who has been selling on Poshmark for about two years, said that the live shows are “all kinds of crazy and chaotic,” generating a fast-paced, ruthless selling environment.
    “When it comes to the live shows, people will kind of steal it out from under you at the last second,” she said.
    Since launching her secondhand market with her two sisters, Dionne’s business keeps getting bigger and bigger – so much so that one of her sisters reduced her full-time day job to part-time in order to focus on the Poshmark shop.
    Last year, the Dionnes made between $4,000 and $5,000 in profit. Just a couple months into this year, they have already surpassed that.
    But now, sellers like the Dionnes are not only competing with Poshmark and Depop peers, but also major retailers like Target and H&M trying to cash in on the resale boom.
    Last week, H&M announced its most recent collaboration with the online thrift store ThredUp, which will now cross-list about 30,000 pieces of secondhand clothing on H&M’s website. Target has launched several ThredUp partnerships of its own, and Etsy bought Depop back in 2021. This January, Poshmark was acquired by South Korean web giant Naver.
    But some independent resellers doubt that the unique, curated experience of indie resale can be scaled.
    “Although bigger companies are trying to occupy this space, I think they miss the mark when it comes to the personal element of vintage,” Finn Thomas, a London-based Depop seller, told CNBC.
    “Part of the charm of buying vintage is the one-on-one interaction between the buyer and seller, the unique story behind each piece and the general curation behind a store, something I can’t see the larger companies like H&M achieving,” Thomas added.

    WATCH LIVEWATCH IN THE APP More

  • 163 Shares159 Views

    in Business

    Blue Origin says an overheated engine part caused last year’s cargo rocket failure

    Jeff Bezos’ space company Blue Origin released findings from an investigation into the failed flight of a cargo mission last year.
    It said the failure was due to an issue in the rocket’s engine nozzle.
    The FAA told CNBC that its “mishap” investigation into the NS-23 mission failure “remains open.”

    The moment of the anomaly during the New Shepard cargo mission NS-23, in which the booster’s engine failed.
    Blue Origin

    Jeff Bezos’ space company Blue Origin released findings from an investigation into the failed flight of a cargo mission last year, which it says was due to an issue in the rocket’s engine nozzle.
    The company’s New Shepard rocket, flying the NS-23 mission carrying science and research payloads, suffered a failure in September 2022. No people were onboard, and Blue Origin says its capsule’s emergency escape system functioned properly, but the rocket’s reusable booster was destroyed.

    Bezos’ company had previously said little about its investigation over the past six months, which was conducted with Federal Aviation Administration oversight. For its part, the FAA told CNBC that the regulator’s “mishap” investigation “remains open.”
    “The agency is currently reviewing the company’s submission of its mishap report. FAA approval is required to close the investigation and for the New Shepard System to return to flight,” an FAA spokesperson said in a statement.
    In a blog post on Friday, Blue Origin said it identified “a thermo-structural failure of the engine nozzle” as the direct cause of the issue, and is now modifying the engine, including design changes to account for higher-than-expected temperatures during the flight.
    “Blue Origin expects to return to flight soon, with a re-flight of the NS-23 payloads,” the company said.

    Sign up here to receive weekly editions of CNBC’s Investing in Space newsletter.

    The New Shepard rocket launches from Blue Origin’s private facility in West Texas, carrying people and payloads above 100 kilometers — or more than 340,000 feet — for a couple minutes of weightlessness. The capsule is flown autonomously, with no human pilot, and floats down with the assistance of a set of parachutes to land in the Texas desert. The New Shepard rocket booster is reusable, returning to land on a concrete pad near the launch site.

    Blue Origin said its investigation found that NS-23 flight’s engine failure was due to “operational temperatures that exceeded the expected and analyzed values of the nozzle material.” The company recovered fragments of the BE-3PM engine’s nozzle, finding “clear evidence of thermal damage and hot streaks resulting from increased operating temperatures.”
    The company noted that its design changes are intended to improve the engine’s performance at high temperature, as well as strengthen the engine’s nozzle.

    WATCH LIVEWATCH IN THE APP More

  • 175 Shares199 Views

    in Business

    Millennials plan to stick with online shopping even as stores rebound, new survey finds

    Over a quarter of millennials will increase their online spending in 2023, according to a new survey.
    Millennials have consistently shown a marked preference for online shopping, compared with other generational cohorts.
    While the early part of the pandemic saw an unprecedented online shopping boom, in-person shopping has been ready for a resurgence, as consumers return to brick-and-mortar stores. 

    People walk by empty retail space in lower Manhattan on April 17, 2017 in New York City. 
    Spencer Platt | Getty Images

    Millennials have big plans for the year ahead, at least when it comes to their online shopping habits. 
    Over 27% of millennials plan to spend “significantly more” online and less in-store this year, according to a survey from ESW, a global direct-to-consumer leader that helps retailers expand DTC channels.

    related investing news

    2 days ago

    It’s a noteworthy update for analysts searching for a winner in the pandemic-era tug of war between brick-and-mortar stores and online shopping. While the early part of the pandemic saw an unprecedented online shopping boom, in-person shopping has been ready for a resurgence, as eager shoppers return to newly reopened brick-and-mortar stores. 
    But millennials, defined as those currently between the ages of 25 and 40, appear ready to stick with e-commerce: 73% of millennial survey participants said they plan to spend “the same or more” online this year. 
    In all, only 15% of millennials said they planned to spend less online in 2023.
    Notably, millennials diverge from other generational cohorts in some key spending categories, per the survey, which polled 16,000 people across 16 countries. 

    People walk by empty retail space in lower Manhattan on April 17, 2017 in New York City. 
    Spencer Platt | Getty Images

    When it comes to health and beauty products, almost 50% more millennials planned to increase their online spending compared with the younger Gen Z, a generation that’s pointedly shaping the beauty industry. 

    Millennials also plan to purchase more luxury goods online this year than Gen Z, Gen X and baby boomers, according to the survey. 
    The enthusiasm for online spending is particularly notable in combination with the relative youth of millennials, a group that still isn’t “in their prime earning years,” said Patrick Bousquet-Chavanne, CEO for ESW North Americas, in a statement. 
    “They are spending more online than in-store across several categories, and these results indicate that brands must continue to evolve, improve, and optimize their ecommerce to attract and retain this increasingly powerful demographic,” Bousquet-Chavanne said.

    WATCH LIVEWATCH IN THE APP More

  • 188 Shares159 Views

    in Finance

    Here are a financial advisor’s 4 most important money tips for parents with young kids

    Ask an Advisor

    There are a few key steps that expectant parents and parents with young kids should consider to position their family for financial success.
    Among the most important considerations are saving for education, investing, establishing a will and contributing to a dependent care FSA, if available.

    Momo Productions | Digitalvision | Getty Images

    Parents with young kids or those expecting a child may wonder: What financial steps should I take to set my family up for success?
    Here are four of the top considerations, according to Rianka Dorsainvil, a certified financial planner and co-CEO of 2050 Wealth Partners. Dorsainvil is also a member of CNBC’s Advisor Council.

    More from Ask an Advisor

    Here are more FA Council perspectives on how to navigate this economy while building wealth.

    1. Save for future education costs

    There are tax-advantaged ways to save for your child’s future education.
    Among the most popular is the 529 plan, which allows parents to invest money for higher education and other costs. The investment grows tax-free, and withdrawals are also tax-free if used for “qualified” expenses.
    Qualified costs include enrollment at a college or university, books, computers, and room and board, among others. They also include up to $10,000 a year of tuition at a private K-12 school, and up to $10,000 on student loan repayments during one’s lifetime.

    Momo Productions | Stone | Getty Images

    One big benefit, Dorsainvil said: Parents can easily change the account beneficiary later if their kid decides not to attend college. That new beneficiary can come from a host of family members. Parents can also withdraw the funds for other purposes, but would owe income tax and a 10% tax penalty on the investment earnings.
    While each state has its own 529 plan, parents can invest in a plan outside their state. Parents might miss out on a state tax break by doing so, but the most important factor when picking a plan is the investment quality, Dorsainvil said.

    For example, parents should generally avoid funds with consistent negative returns and with an annual fee, known as an “expense ratio,” exceeding 0.5%, she said.

    Parents also shouldn’t save for a child’s education at the expense of their own financial well-being, Dorsainvil said.
    “There’s no loan for retirement,” she said. “So while it’s super important for our clients to save for our children’s education, we want to make sure they’re putting their financial oxygen mask on first and that they’re saving for their own retirement.”

    2. Invest on your child’s behalf

    Images By Tang Ming Tung | Digitalvision | Getty Images

    Parents who want to invest money for their kids — and not have their funds sitting in cash at the bank — can do so in custodial brokerage accounts.
    For example, UGMA and UTMA accounts are held in the name of a minor but controlled by a parent until legal adulthood. That ranges from 18 to 21 years old, depending on the state. The acronyms stand for Uniform Gifts to Minors Act and Uniform Transfers to Minors Act.
    One caveat: Once the beneficiary reaches adulthood, the money is theirs. Gifts and transfers made to these accounts can’t be revoked. The beneficiary can then use the money for any purpose.
    “I think parents should ask, do they want to relinquish ownership of this money when their child is an adult?” Dorsainvil said. “That is the key question.”
    There are other avenues for parents to invest for their kids, but they may be more challenging. For example, parents can set up a Roth individual retirement account for a minor, but the child must have earned income to do so, Dorsainvil said.

    3. Update or prepare an estate plan

    Weekend Images Inc. | E+ | Getty Images

    A common misconception is that only the rich need wills and other estate documents — but it’s important for any parent to have a will, Dorsainvil said.
    A will is a legal document that shares what you’d like to have done with your belongings and other assets in the event of your death.
    Where this especially comes into play for parents with minor children: There’s a guardianship clause in wills that answers the question of who the parent would want to have physical custody of their children should anything happen to them, Dorsainvil said.
    If both parents pass away early and there’s no living guardian, the state or court will generally decide — absent a will — what happens to the child, Dorsainvil said.
    “I’m pretty sure every parent knows what they want to happen to their kid if they’re no longer there,” she said.

    4. Use a dependent care flexible spending account

    Halfpoint Images | Moment | Getty Images

    Dependent care flexible spending accounts are a tax-advantaged way to save for annual costs of child care.
    Offered through the workplace, dependent care FSAs let families save up to $5,000 a year in pretax funds for day care, after-school programs, work-related babysitting, summer day camps and more.
    Dependents and programs must meet various criteria for parents to qualify for the tax break. For example, children must be under age 13; programs such as piano or dance lessons, overnight camps and kindergarten tuition are ineligible.
    Earmarking funds in a pretax account reduces your taxable income, since you don’t pay tax on those contributions.
    You can also use the accounts to reimburse yourself for qualified expenses you’re paying out of pocket. More

  • 163 Shares199 Views

    in Finance

    Deutsche Bank is not the next Credit Suisse, analysts say as panic spreads

    The emergency rescue of Credit Suisse by UBS, in the wake of the collapse of U.S.-based Silicon Valley Bank, has triggered contagion concern among investors.
    This was deepened by further monetary policy tightening from the U.S. Federal Reserve on Wednesday.
    Deutsche Bank underwent a multibillion-euro restructure in recent years aimed at reducing costs and improving profitability.
    Deutsche Bank recorded annual net income of 5 billion euros ($5.4 billion) in 2022, up 159% from the previous year.

    A general meeting of Deutsche Bank
    Arne Dedert | picture alliance | Getty Images

    Deutsche Bank shares slid Friday while the cost of insuring against its default spiked, as the German lender was engulfed by market panic about the stability of the European banking sector.
    However, many analysts were left scratching their heads as to why the bank, which has posted 10 consecutive quarters of profit and boasts strong capital and solvency positions, had become the next target of a market seemingly in “seek and destroy” mode.

    related investing news

    The emergency rescue of Credit Suisse by UBS, in the wake of the collapse of U.S.-based Silicon Valley Bank, has triggered contagion concern among investors, which was deepened by further monetary policy tightening from the U.S. Federal Reserve on Wednesday.
    Central banks and regulators had hoped that the Credit Suisse rescue deal, brokered by Swiss authorities, would help calm investor jitters about the stability of Europe’s banks.
    But the fall of the 167-year-old Swiss institution, and the upending of creditor hierarchy rules to wipe out 16 billion Swiss francs ($17.4 billion) of Credit Suisse’s additional tier-one (AT1) bonds, left the market unconvinced that the deal would be sufficient to contain the stresses in the sector.

    Deutsche Bank underwent a multibillion-euro restructure in recent years aimed at reducing costs and improving profitability. The lender recorded annual net income of 5 billion euros ($5.4 billion) in 2022, up 159% from the previous year.
    Its CET1 ratio — a measure of bank solvency — came in at 13.4% at the end of 2022, while its liquidity coverage ratio was 142% and its net stable funding ratio stood at 119%. These figures would not indicate that there is any cause for concern about the bank’s solvency or liquidity position.

    German Chancellor Olaf Scholz told a news conference in Brussels on Friday that Deutsche Bank had “thoroughly reorganized and modernized its business model and is a very profitable bank,” adding that there is no basis to speculate about its future.
    ‘Just not very scary’
    Some of the concerns around Deutsche Bank have centered on its U.S. commercial real estate exposures and substantial derivatives book.
    However, research firm Autonomous, a subsidiary of AllianceBernstein, on Friday dismissed these concerns as both “well known” and “just not very scary,” pointing to the bank’s “robust capital and liquidity positions.”
    “Our Underperform rating on the stock is simply driven by our view that there are more attractive equity stories elsewhere in the sector (i.e. relative value),” Autonomous strategists Stuart Graham and Leona Li said in a research note.
    “We have no concerns about Deutsche’s viability or asset marks. To be crystal clear – Deutsche is NOT the next Credit Suisse.”
    Unlike the stricken Swiss lender, they highlighted that Deutsche is “solidly profitable,” and Autonomous forecasts a return on tangible book value of 7.1% for 2023, rising to 8.5% by 2025.
    ‘Fresh and intense focus’ on liquidity
    Credit Suisse’s collapse boiled down to a combination of three causes, according to JPMorgan. These were a “string of governance failures that had eroded confidence in management’s abilities,” a challenging market backdrop that hampered the bank’s restructuring plan, and the market’s “fresh and intense focus on liquidity risk” in the wake of the SVB collapse.
    While the latter proved to be the final trigger, the Wall Street bank argued that the importance of the environment in which Credit Suisse was trying to overhaul its business model could not be understated, as illustrated by a comparison with Deutsche.
    “The German bank had its own share of headline pressure and governance fumbles, and in our view had a far lower quality franchise to begin with, which while significantly less levered today, still commands a relatively elevated cost base and has relied on its FICC (fixed income, currencies and commodities) trading franchise for organic capital generation and credit re-rating,” JPMorgan strategists said in a note Friday.

    “By comparison, although Credit Suisse clearly has shared the struggles of running a cost and capital intensive IB [investment bank], for the longest time it still had up its sleeve both a high-quality Asset and Wealth Management franchise, and a profitable Swiss Bank; all of which was well capitalised from both a RWA [risk-weighted asset] and Leverage exposure standpoint.”
    They added that whatever the quality of the franchise, the events of recent months had proven that such institutions “rely entirely on trust.”
    “Where Deutsche’s governance fumbles could not incrementally ‘cost’ the bank anything in franchise loss, Credit Suisse’s were immediately punished with investor outflows in the Wealth Management division, causing what should have been seen as the bank’s ‘crown jewel’ to themselves deepen the bank’s P&L losses,” they noted.
    At the time of SVB’s collapse, Credit Suisse was already in the spotlight over its liquidity position and had suffered massive outflows in the fourth quarter of 2022 that had yet to reverse.

    JPMorgan was unable to determine whether the unprecedented depositor outflows suffered by the Swiss bank had been amassed by themselves in light of SVB’s failure, or had been driven by a fear of those outflows and “lack of conviction in management’s assurances.”
    “Indeed, if there is anything depositors might learn from the past few weeks, both in the U.S. and Europe, it is just how far regulators will always go to ensure depositors are protected,” the note said.
    “Be that as it may, the lesson for investors (and indeed issuers) here is clear – ultimately, confidence is key, whether derived from the market backdrop as a whole (again recalling Deutsche Bank’s more successful re-rating), or from management’s ability to provide more transparency to otherwise opaque liquidity measures.”
    — CNBC’s Michael Bloom contributed to this report.

    WATCH LIVEWATCH IN THE APP More