The BNP attacked. Concern for the largest French bank?

This is an article from the Investing website that traces the concerns of the markets (and savers) about the health of large banks, especially European ones.

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

Last week it was Credit Suisse stock that was massacred on the stock exchange and the management of the large Swiss bank had to spend the weekend reassuring on the creditworthiness of the institution.

Investor concern over Credit Suisse has caused its shares to plummet 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’s important to remain objective and nuanced.

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

But looking only at this does not mean taking into consideration the potential risks of accident for example (and not coincidentally) on the derivatives markets with a position of these banks which could prove catastrophic in the event of an extreme event in the markets which is what we are living with the energy crisis!

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

If bankruptcies in the real economy increase, so too will the cost of risk, that is, unpaid loans to banks.

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 lasting a possible capital problem. But this will happen later and it is a phenomenon that will gradually materialize over the next 12-24 months if it has to happen and we will see it in the study of the financial statements of the banks that I follow for my subscribers to the STRATEGIES letter.

We are not.

A logical and predictable drop in prices

It is common for bank stock prices to be under pressure as markets readjust their profit forecasts significantly downwards for banks. Less profits, less dividends then prices oriented downwards and sold short.

There is therefore nothing to be really surprised about.

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

So it is not necessary to start running in all directions. However, this should remind us of the necessary risk distribution and the essential diversification of both your assets and assets.

Those who ask questions and want to go further, can subscribe to my STRATEGIE Letter with only 98 euros and you will have access not only to more than 85 files already published over 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 generally counts in thousands of euros in losses ! To invest in your wealth management and STRATEGIES letter, it’s here.

Prepare yourself!


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