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Banks up the risk with block trades

May 25, 2016 10:28 AM ETCredit Suisse Group AG (CS) StockBAC, JPM, C, DB, CSBy: Stephen Alpher, SA News Editor7 Comments
  • About half of all share sales by public companies this year have been block trades, writes Corrie Driebusch, versus an average of about one-third over the past five years, and just one-fifth over the past decade.
  • To review, a block trade involves a bank buying a large chunk of stock from a company or its P-E backers at a discount, in the hopes of unloading it piece-by-piece later that day at a markup.
  • The increase in block trades, of course, comes as business slows at any number of other bank profit centers, particularly fixed-income trading.
  • For the most part, block deals have mostly proved profitable this year, with an average one-day return of 0.5%, according to Dealogic. The leaders in U.S. block trades this year are Credit Suisse (NYSE:CS) and JPMorgan (NYSE:JPM), with Deutsche Bank (NYSE:DB), Bank of America (NYSE:BAC), and Citigroup (NYSE:C) also notable participants.

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