Switzerland Strengthens Its Banks; Short Interest Remains Low

Switzerland today joined the list of countries taking unprecedented measures to strengthen their banks with the government taking an indirect SFR6bn ($5.3bn) stake in UBS (UBS) and Credit Suisse (CS), raising SFR 10bn from private investors and the Qatar Investment Authority. (FT.com)

UBS, one of the largest casualties of the US credit crisis, saw its shares were up 2.2% after falling as much as 10% today. Credit Suisse shares were down 1.3%, having dropped as much as 9.2%.

Our data reveals that little of UBS's Market Cap has been out on loan to short investors (%MCOL) over the past three months, as you will see from this chart below. Moreover, the all-time high was in mid-September, when the %MCOL reached 3% - small fry, compared to that of Fannie Mae (FNM) and Freddie Mac (FRE) who peaked as high as 40% earlier this year. Today's figure for UBS's MCOL is 0.89%. Both the Lendable Quantity and the Quantity on loan have decreased significantly in the past four weeks.

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Short interest in Credit Suisse has also remained low, under 4% MCOL in the same time frame, and now stands at 2% today. There was an increase in short interest in mid-September, from 1.8% to 3.5% within the space of two weeks. Like UBS, Credit Suisse's Lendable Quantity and Quantity on loan have decreased in the past month.

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Comments

[venividivici:]

Jessica you look slightly embarrassed and maybe I can understand why. Please explain to me why UBS deserves to survive? If there was any justice in the world they should be flushed down the toilet where they belong. I know Cramer is very conerned about them. WHY???? Is it because they have put so much effort into ensuring that rich people avoid as much tax as possible?????

2008 Oct 16 11:05 AM

[Mr.G:]

I wouldnt touch a swiss bank with a 10 foot pole supposedly they are overleveraged 1200% (not a typo) over switzerlands GDP -the swiss franc could be worthless tomorrow while they sink with their banks (they should have done what they have always done (stay neutral ) - and let the banks fail . they arent recapitalized they are just kept alive to die another day

source: article - ny times sat. Oct. 11th

2008 Oct 16 02:24 PM

[Rumpole:]

veni..., is Jessica suggesting that UBS should survive? To me, she's just providing some factual information.
While I share the same sentiment as veni... and mr.g, what I'd like to know is whether veni... and mr.g have acted consistent with their vitriolic words. In other words, have you guys taken out put options, long-dated or otherwise, so you can profit from either or both of UBS or CS demise? Transparency is key in a free market after all (lol)!

2008 Oct 16 04:43 PM