Finance

Credit Suisse shares plunge 18%

Published

2 years ago

October 29, 2022

Credit Suisse shares plunged 18% on Thursday after the Swiss bank posted a quarterly loss that was significantly worse than analyst estimates, and announced a massive strategic overhaul.

The embattled lender posted a third-quarter net loss of 4.034 billion Swiss francs ($4.09 billion), compared to analyst expectations for a loss of 567.93 million Swiss francs. The figure was also well below the 434 million Swiss franc profit posted for the same quarter last year.

The bank noted that the loss reflected a 3.655 billion Swiss franc impairment relating to the “reassessment of deferred tax assets as a result of the comprehensive strategic review.”

Under pressure from investors, the bank revealed a major overhaul of its business in a bid to address underperformance in its investment bank and following a raft of litigation costs that have hammered earnings. New CEO Ulrich Koerner told CNBC on Thursday it represented the beginning of a “transformation into a new Credit Suisse.”

We’re aiming for ‘radical restructuring’ of investment bank: Credit Suisse CEO

In its widely anticipated strategic shift, the bank vowed to “radically restructure” its investment bank to significantly cut its exposure to risk-weighted assets, which are used to determine a bank’s capital requirements. It also aims to cut its cost base by 15%, or 2.5 billion Swiss francs, by 2025.

The bank expects to incur restructuring charges of 2.9 billion Swiss francs by the end of 2024.

The transformation plan will see Credit Suisse split off its investment bank into an independent business called CS First Boston, raise 4 billion Swiss franc in capital through the issuance of new shares and a rights offering, and create a capital release unit to wind down lower-return, non-strategic businesses.

Of the planned 4 billion Swiss franc capital raise, the bank revealed that 1.5 billion Swiss francs will come from the Saudi National Bank in exchange for a shareholding of up to 9.9%.

The aim is to reduce risk-weighted assets and leverage exposure by 40% each over the course of the restructure, while the bank also set out to allocate “almost 80% of capital to Wealth Management, Swiss Bank, Asset Management and Markets by 2025.”

Speaking to CNBC, Koerner said the bank will be “much more stable, will be sustainably profitable, much simpler in how it is set up, and for us, one of the most important things was how did we come to that solution? We started actually with the client needs and we designed everything around the client needs and ended up with what we are proposing today.”

Credit Suisse share price

Koerner took the helm in July following the resignation of predecessor Thomas Gottstein, after the bank booked a second-quarter net loss of 1.593 billion Swiss francs, far below consensus expectations among analysts. He said Thursday’s strategic overhaul represented a “very decisive action program.”

“Number one, a radical restructure of the investment bank; number two, a significant reduction of costs; and number three, a further strengthening of our capital base, and I think with that, we have all the necessary ingredients … to go where we want to go,” he added.

Credit Suisse has been plagued over the past year by sluggish investment banking revenues, losses from the withdrawal of its business in Russia and litigation costs relating to a host of legacy compliance and risk management failures, most notably the Archegos hedge fund scandal.

Here are some other financial highlights for the third quarter:

Group revenue hit 3.804 billion Swiss francs, down from 5.437 billion Swiss francs for the same period last year.
CET1 capital ratio, a measure of bank solvency, was 12.6%, compared to 14.4% at the same time last year and 13.5% in the previous quarter.
Return on tangible equity was -38.3%, down from -15% in the second quarter and 4.5% in the third quarter of 2021.

Execution risks

Vitaline Yeterian, senior vice president for global financial institutions at DBRS Morningstar, said the scale of the third-quarter loss was indicative of the stress Credit Suisse had suffered in its core business.

“Both in Q3 and 9M 2022, total revenues were below operating costs and well below peers in its core investment banking and wealth management businesses,” she said.

“The main drivers were much lower commissions and fees due to lower client activity, as well as lower trading revenues due to a drop in capital markets revenues. Meanwhile total net interest income was also down YOY (in Q3 and over 9M).”

The bank also saw an outflow of deposits and assets under management, which it attributed in part to reputational harm resulting from the Archegos and Greensill Capital sagas, along with a spike in withdrawals earlier this month following what the bank called “negative press and social media coverage based on incorrect rumors.”

Yeterian said the rejuvenation of the CS First Boston brand could “help to disconnect the IB from the repeated negative press coverage CS has been subject to.”

“We clearly see execution risks for the restructuring — in particular considering the challenging economic and geopolitical backdrops,” she added.

“The CET1 ratio was 12.6% at end-Q3 2022, down 90 bps vs end-June 2022. The capital increase will clearly provide some room to execute CS’s plan, although it is not fully secured.”

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Crypto

Bitcoin’s Recovery – the Downturn Is Over

Published

5 months ago

July 16, 2024

The market is currently in a news-driven environment where the prices of cryptocurrencies have been determined by news agenda rather than fundamentals.

Bitfinex analysts have warned crypto investors to be cautious as bitcoin’s (BTC) recovery over the weekend is not a sign that its correction is over; the asset could witness more bloodshed in the near term.

In the latest Bitfinex Alpha report, experts deemed the market’s reaction this week critical, especially as supply alleviated over the weekend could return when traditional markets open.

“No Man’s Land”

Since Saturday, bitcoin has risen almost 10% from $57,600 to $63,000, closing last week in the green. The asset has surged above the 125-day range low of $60,200, which it broke through earlier this month after news of the German government’s massive BTC selling hit the market.

Market sentiment began to improve after reports that wallets linked to the German government were almost empty. However, the positive sentiment may not be sustained for long as the BTC the German authorities moved to trading desks and exchanges are yet to be sold.

While the supply from Germany appears to have been factored into bitcoin’s market price, Bitfinex analysts believe the end of selling pressure depends on how the involved trading desks execute their trades in the coming days.

Although the shift in sentiment underscores the market’s capacity to integrate new information and adjust expectations quickly, analysts think the market’s reaction over the first two trading days of the week cannot be overlooked for two reasons.

First, the low support level in the $60,200 range has now become a potential resistance line. Second, trading patterns over the past three months suggest that weekends are usually favorable for markets, especially on Saturdays when supply pressure seems to subside.

“We are now in no man’s land until we get clear resolution above or below this level,” the analysts said.

A News-Driven Environment

Besides the potential resistance level and three-month weekend trading pattern, the market is currently in a news-driven environment, where the prices of cryptocurrencies have been determined by news agendas rather than fundamentals.

Since selling pressure concerns are not yet completely obsolete due to upcoming Mt Gox creditor distributions, Bitfinex analysts expect such headlines to continue to have some impact on price movements. As such, the analysts urged investors to exercise caution in their trading strategies.

Reports /Trainviral/

Crypto

Bitcoin ETFs Saw $300M in Daily Net Inflows

Published

5 months ago

July 16, 2024

BlackRock’s IBIT led with $117.25 million in inflows on July 15, also being the most traded Bitcoin ETF.

The US spot Bitcoin ETFs recorded a daily net inflow of $301 million on July 15th. This extended their winning streak to seven consecutive days amidst a broader market recovery.

None of the ETFs recorded outflows for the day.

Bitcoin ETFs Rake in $16.11B in Net Inflows Since Jan

According to the data compiled by SoSoValue, BlackRock’s IBIT, the top spot Bitcoin ETF by net asset value, recorded the largest net inflows of the day at $117.25 million. IBIT was also the most actively traded Bitcoin ETF on Monday, with a volume of $1.24 billion. Ark Invest and 21Shares’ ARKB came in close behind with net inflows of $117.19 million.

Fidelity’s FBTC experienced net inflows of $36.15 million on Monday, while Bitwise’s BITB saw $15.24 million in inflows. VanEck’s HODL, Invesco and Galaxy Digital’s BTCO, and Franklin Templeton’s EZBC funds also recorded net inflows. Meanwhile, Grayscale’s GBTC and other ETFs, such as Valkyrie’s BRRR, WisdomTree’s BTCW, and Hashdex’s DEFI, registered no flows for the day.

A total of $2.26 billion was traded on Monday. The trading volume for these ETFs was less than in March when it exceeded $8 billion on some days. Meanwhile, these funds have collectively attracted $16.11 billion in net inflow since their January launch.

What’s Next For Bitcoin?

Earlier this month, bitcoin’s price decline was mainly due to fears of massive selling pressure from Mt. Gox and the German government’s BTC sales.

But the assassination attempt on pro-crypto former US President and presumptive Republican candidate Donald Trump at Saturday’s rally seemed to spark a recovery in the world’s largest digital asset, and experts are bullish on the asset’s price trajectory going forward. Bitcoin surged more than 9% over the past week and was currently trading slightly below $64,000.

Veteran trader Peter Brandt discussed bitcoin’s price outlook, suggesting a potential major rally. He referred to a pattern he terms “Hump->Slump->Bump->Dump->Pump” and highlighted that the July 5 double top attempt was a bear trap, confirmed by the July 13 close. He sees a likely continued upward trend but warned that a close below $56,000 would negate this bullish view.

“Bitcoin $BTC could be unfolding its often-repeated Hump…Slump…Bump…Dump…Pump chart construction. Jul 5 attempt at the double top was a bear trap, confirmed by Jul 13 close. Most likely scenario now is that bears are trapped. Close below $56k negates this interpretation”

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Crypto

LI.FI DeFi Platform Exploited, Over $8M Lost

Published

5 months ago

July 16, 2024

PeckShield alert reveals LI.FI’s protocol vulnerability is similar to a March 2022 attack, with the same bug recurring.

The decentralized finance (DeFi) platform LI.FI protocol has suffered an exploit amounting to over $8 million.

Cyvers Alerts reported detecting suspicious transactions within the LI.FI cross-chain transaction aggregator.

LI.FI Issues Warning After $8 Million Exploit

LI.FI confirmed the breach in a statement on July 16 via X: “Please do not interact with any http://LI.FI powered applications for now! We’re investigating a potential exploit.” The team clarified that users who did not set infinite approval are not at risk, emphasizing that only those who manually set infinite approvals seem to be affected.

According to Cyvers Alerts, more than $8 million in user funds have been stolen, with the majority being stablecoins. According to on-chain data, the hacker’s wallet holds 1,715 Ether (ETH) valued at $5.8 million and USDC, USDT, and DAI stablecoins.

Cyvers Alerts advised users to revoke relevant authorizations immediately, noting that the attacker is actively converting USDC and USDT into ETH.

Crypto security firm Decurity provided insights into the exploit, stating that it involves the LI.FI bridge. “The root cause is a possibility of an arbitrary call with user-controlled data via depositToGasZipERC20() in GasZipFacet, which was deployed 5 days ago,” Decurity explained on X.

“In general, the risks behind routers, cross-chain swaps, etc. are about token approvals. Raw native assets like (unwrapped) ETH are safe from these kinds of hacks b/c they don’t have approvals as an option. Most users & wallets also no longer do “infinite approvals” which gives a smart contract total control on removing any amount of their tokens. It’s important to understand which tokens you’re approving to which contracts.

This dashboard looks for all transactions of a user that intersects Lifi. Not all of these transactions indicate risk- but you can see how, broadly, integrations & layers of tech (like how Metamask bridge uses Lifi on BSC) can complicate how users do or don’t put their assets at risk. Revoke Cash is the most well known approval manager app.

But it’s also good security practice to simply rotate your address. New addresses start with 0 approvals, so starting fresh by moving your tokens to a fresh address is another good security practice.” – commented Carlos Mercado, Data Scientist at Flipside Crypto.

Recent Exploit Mirrors March 2022 Attack

Further analysis by PeckShield alert revealed that the vulnerability is similar to a previous attack on LI.FI’s protocol that occurred on March 20, 2022. That incident saw a bad actor exploit LI.FI’s smart contract, specifically the swapping feature, before bridging.

The attacker manipulated the system to call token contracts directly within their contract’s context, making users who had given infinite approval vulnerable. This exploit resulted in the theft of approximately 205 ETH from 29 wallets, affecting tokens such as USDC, MATIC, RPL, GNO, USDT, MVI, AUDIO, AAVE, JRT, and DAI.

“The bug is basically the same. Are we learning anything from the past lesson(s)?” PeckShield Alert said in a July 16 X post.

Following the 2022 incident, LI.FI disabled all swap methods in its smart contract and worked on developing a fix to prevent future vulnerabilities. However, the recurrence of a similar exploit raises concerns about the platform’s security measures and whether adequate steps were taken to address the vulnerabilities identified in the previous breach.

LI.FI is a liquidity aggregation protocol that allows users to trade across various blockchains, venues, and bridges.

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