SocGen, Unicredit On "Brink Of Disaster"?
Over the past 48 hours we had heard pervasive rumors that at least one, maybe more, banks in Europe are on the verge of collapse. Our thought was, naturally, Dexia, which is the modern equivalent of AIG, not to mention the bank most rescued by none other than the Federal Reserve. Well, we were wrong. And if the Daily Mail is correct, the two banks about to kick the bucket are French SocGen and Italy's UniCredit. While the fact that these two banks are in trouble has not been lost on the market, which has been sending their CDS to near record highs, the speculation that they are far closer to implosion likely means that the equity value of the European banking sector is about to be decimated.
Unicredit : 40 million customers in 22 countries, worth 929 billion euro or 1.4 trillion $US...
SocGen : Worth 1.1 trillion euro or 1.54 trillion $US...
Those two banks are bigger than any Lehman Brothers or AIG...
France and Germany interest on their bonds is going up too...
You add in the Credit Default Swaps all connected to this... and you got a nice party... an economic Armageddon party.... they have to bail them out, at any cost or the whole game is over.
Everything bad is lining up this week... the race to the bottom... who will crash first... the US or Europe... for now it seems like Europe will go under way before the US.
Update : It seems the markets aren't believing it... no selling so far... and the CDS of both banks are not moving much...
Euro Bank Bailout 2.0: SocGen & Unicredit Teetering On 'Brink Of Collapse'
Source: Daily Mail
Fears are growing this weekend that two of Europe’s largest banks may require a bailout, having been hugely damaged by the worsening crisis across the eurozone.
In France, President Nicolas Sarkozy is having to confront the possibility that the country’s second-biggest bank, Societe Generale -commonly known as SocGen - is on the brink of disaster after huge losses over loans made to Greece.
The chilling possibility of the largest bank in Italy, UniCredit Banca, suffering a similar collapse if a bailout is not implemented comes as Silvio Berlusconi already faces an increasingly dangerous national economic situation.
In Britain, a senior Government source described the position of the two banks as ‘perilous’, although an official Treasury spokesman declined to comment. Should either bank collapse, British customers with deposits of up to about £85,000 would be protected by the Financial Services Compensation Scheme.
The merest hint a major bank might fall is likely to reignite panic tomorrow in the stock market, which is already feared to react badly to the credit downgrade of the U.S. by rating agency Standard & Poor’s.
Last night Chancellor George Osborne, whose Treasury officials have ‘war-gamed’ various scenarios ahead of the markets opening, was due to discuss the crisis with Christine Lagarde, head of the International Monetary Fund (IMF).
SocGen reported a loss of £350million on Greek debt last week. It has a total of £2.2billion of Greek debt and also owns 88 per cent of the Greek bank Geniki, whose value has collapsed in recent months.
For Italy, damage to UniCredit, in which Barclays has a two per cent share, would be a bitter blow. Its strategy of caution has led it to invest heavily in Italian government bonds which were until recently seen as safe, but as these have come under pressure the bank’s shares have plummeted.
Experts fear that if any single bank is seen to be in trouble, all lending could freeze up in the resultant climate of fear, with devastating consequences.
As ministers of the G7 nations - Britain, France, Italy, Germany, Japan, the U.S. and Canada - prepare to meet to discuss the mounting euro crisis, the French and Italian governments are believed to be standing ready to rescue the banking giants.