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Middleton: Is BNP Paribas A Bank Run Candidate?

  • Written by Syndicated Publisher No Comments Comments
    November 8, 2011

    As promised in the post from earlier today, I have updated numbers in the BoomBustBlog BNP Paribas “Run On The Bank” Model for professional/institutional subscribers, which can be downloaded here BNP Exposures update – Professional Subscriber Download Version.

    Other subscription levels and even non-paying readers should reference The BoomBustBlog BNP Paribas “Run On The Bank” Model Available for Download for other goodies available to inquiring minds.

    Long story short, it doesn’t look good.

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    Professional/Institiutional subscribers who have downloaded the afore-linked model should realize that this bank’s Greco exposure, if realistically marked, can (and most likely will) take a much larger chunk out of TEC. This doesn’t even come close to recognizing the risks and writedowns from the other soveriegns. Be sure to take a look at the potential for cash defincies in the bank run scenario tab.

    And from The BoomBustBlog BNP Paribas “Run On The Bank” Model Available for Download:

    A very, very well timed call indeed. Now, back to the Bloomberg article…

    “It’s nice to see that the risk factors coming out of Europe are abating somewhat,” Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust in Boston, said in a telephone interview. “That addresses the liquidity issue that would be threatening the European banking system.”

    … The cost of insuring European sovereign and corporate debt extended declines after the ECB announcement and as the prospect of default by Greece receded. The Markit iTraxx SovX Western Europe Index of swaps tied to 15 governments dropped 13 basis points to 330 as of 2:45 p.m. in London, the lowest since Sept. 9 and signaling an improvement in perceptions of credit quality. Swaps on Francefell 10 basis points to 171, contracts on Italy dropped 29 basis points to 442 and Spain fell 22 basis points to 370, CMA prices show.

    Cheap dollar funding is not going to help BNP anymore than it helped Lehman. I have prepared several models to illustrate such, and are designed to go hand in hand with both our illustrative trading supplements and our forensic research on BNP – namely:

    The first model (all are cast in Excel 2010 format [.xlsx]), File Icon BNP Exposures – Free Public Download Version, is available to the public free of charge and is designed to spark the discussion of Whether Another Banking Crisis Is Inevitable? I will be discussing this model, and its ramifications on Max Keiser, Russian Television – to be televised Tuesday. It should be interesting. Here are some screen shots.

    The Impairment Scenarios: a very important concept that practically the entire European banking systm has somehow forgotten to address.

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    Trading and HTM inventory at Level 1,2,3 or fantastical fanstasy?

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    For those not familiar with the banking book vs trading book markdown game, I urge you to review this keynote presentation given in Amsterdam which predicted this very scenario, and reference the blog post and research of the same – and then revisit this free model and reapply your assumptions:

    The next nugget of knowledge is the File Icon BNP Exposures – Retail Subscriber Download Version. It enables users to simulate an anecdotal bank run – for retail subscribers only of course. In addition to those above, it sports…

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     For those professional investors and institutions, namely hedge funds, asset managers, regulators, high net worth individuals with ties to BNP and family offices, heres to you. This is not a toy, but a tool that can truly communicate why you feel BNP may, or may not be a candidate for a bank run – contingent upon your inputs: File Icon BNP Exposures – Professional Subscriber Download Version. Additional screenshots above and beyond that included above…

    Income statement implications of a true bank run…

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    Let’s recap the BoomBustBlog perspective before I offer my opinion for the upcoming week…

    Saturday, 23 July 2011 The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!: I detail how I see modern bank runs unfolding

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    Thursday, 28 July 2011  The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement

    I identify specific bank run candidates and offer illustrative trade setups to capture alpha from such an event. The options quoted were unfortunately unavailable to American investors, and enjoyed a literal explosion in gamma and implied volatility. Not to fear, fruits of those juicy premiums were able to be tasted elsewhere as plain vanilla shorts and even single stock futures threw off insane profits.

    Wednesday, 03 August 2011 France, As Most Susceptble To Contagion, Will See Its Banks Suffer

    In case the hint was strong enough, I explicitly state that although the sell side and the media are looking at Greece sparking Italy, it is France and french banks in particular that risk bringing the Franco-Italia make-believe capitalism session, aka the French leveraged Italian sector of the Euro ponzi scheme down, on its head.

    I then provide a deep dive of the French bank we feel is most at risk. Let it be known that every banked remotely referenced by this research has been halved (at a mininal) in share price! Most are down ~10% of more today, alone!

    Images: Flickr (licence/attribution)

    About The Author

    Reggie Middleton is an entrepreneurial investor who guides a small team of independent analysts to uncover truths, seldom if, ever published in the mainstream media or Wall Street analysts reports. Since the inception of his BoomBustBlog, he has established an outstanding track record
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