A Look at Bank and Broker Default Risk

Below we highlight the prices for insuring against default for the major global banks and brokers.

The credit default swap (5-Yr CDS) is quoted in basis points and is the yearly cost of insuring against default for 5 years. So a CDS trading at 100 would cost $100 per year to insure $10,000 worth of bonds for 5 years.

As shown below, default risk at Lehman (LEH) and Merrill Lynch (MER) are currently the highest. Both are currently more than 250 basis points. Citigroup (C) ranks third, followed by BSC, WB, MS, GS, UBS and JPM.

At the bottom of the list (the safest) are BNP Paribas (BNPQY.PK), Deutsche Bank (DB) and Wells Fargo (WFC). While insuring against default is still very high for most of these companies, prices were much higher just a couple of weeks ago.

Comments

[Ryan:]

What was Bear Stearns at before it was bought by JPM?

2008 Mar 31 05:33 PM

[moo:]

A more realistic analysis is done better here:
beit07.blogspot.com/20...

Furthermore your conclusion is startling! JP Morgan is riskiest according to beit07 (the above link) NOT the safest!!

2008 Mar 31 11:51 PM

[swissstocks:]

I suppose that UBS will be higher in the ranking after this morning annoucement. The problem for the whole industry remains in the lack of visility... about their true current situation

2008 Apr 01 02:40 AM