Credit Suisse: Not a Team Player, but Profitable

Credit Suisse reported reasonably good results, by bank standards and especially by UBS standards, this morning. But its reputation in the loan markets is taking a beating in the wake of the behavior detailed by Heidi Moore yesterday. Every time that CS finds itself on a loan syndicate, it seems, it hedges or dumps its allocation in advance of the rest of the syndicate, souring the turf for everybody else.

Equity Private is unimpressed:

Some rather uncivilized behaviors by certain banks (ahem, Credit Suisse) that have gone to market with their share of Harrah's debt before the schedule agreed upon by their fellow underwriters (very bad form, that) will cause the always astute Going Private reader to draw many conclusions about the "desperation quotient" these kind of balance sheet lodestones can create. This event also generates my favorite debt-related quote of the year so far from a Credit Suisse banker on the subject of front-running their underwriting colleagues:

"There is no contractual obligation. We cannot concede control over our own capital."

Dear John Thain goes one further, crunching the numbers to work out whether CS isn't hurting itself along with everybody else. Since the bank has some $300 billion of syndicated loans on its own balance sheet, the mark-to-market losses caused by its own front-running could be greater than its savings on getting out ahead of the syndicate. He concludes:

Because this situation has wreaked such havoc, perhaps other shops will actually take a stand and block C.S. from future syndicated deals. Their actions seem to show they can be relied upon neither to mitigate risk nor aid in distributing any.

But none of this is going to worry CS executives. After all, they're popping Champagne corks right now: CS is earning more than UBS for the first time in 10 years. That, to them, matters much more than the loan market.

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