Friday, 21 November 2008

A tale of four champions

In a moment of whimsy, I decided to use Bloomberg's good offices to look at the performance of four national champion banks - or at least large banks - over the last little while. I picked Citi, Deutsche, Paribas and Santander. Of course you can argue that these are not real champions, and I might well agree, but let's follow the data for a moment. The first thing that leaps out is the outperformance of Paribas. Given they are a rather similar bank to Deutsche, that was a surprise. Citi's malaise has got a lot of press, Deutsche's less so. And Santander still looks over-valued in this company: concerned though I am about Citi's proposed slimming plan, at least they have a plan and shareholders who can hold management to account, whereas I am not a buyer of the Botín myth. If you fancied a punt and could figure out a way to do it cheaply*, you might consider selling CDS on DBK (sub?) debt and shorting SAN's equity. C is down so far that you might summon a lot of courage and consider buying the equity. Yes, I know, that is a big step and you might get conviscated, but if C survives, it is likely worth more than last night's close of $4.71 a share.

*Selling short-dated out of the money calls is another choice if the borrow is expensive or impossible.

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