|1-year Greek Yield Hit 189% high!|
In John Hussman's recent note (Europe: Just Getting Warmed Up), see a list of european banks with the highest gross leverage ratios. Dexia SA was second on the list, after Landesbank Berlin, with a leverage ratio of 52.83. On October 9, Dexia was rescued by France, Belgium and Luxembourg and provided a "90 billion-euro, 10-year guarantee to cover funding needs" (Bloomberg). Now it's all up to the EFSF (European Financial Stability Facility) to prevent a Lehman-esque euro-zone financial crisis.
"The corresponding calculations for several major European Banks are below. These calculations essentially mirror Weil's list. Landesbank Berlin, Deutsche Bank and Credit Agricole are of greatest concern. While Danske Bank technically has a higher leverage ratio than Commerzbank, it has a larger buffer in the form of common equity - Commerzbank has only 1% of tangible common equity against its assets, the other 2% being more bond-like preferred equity.
When you consider the fact that most U.S. banks, just before the U.S. credit crisis in 2008, sported gross leverage ratios of about 12 (where Citigroup, Morgan Stanley, Goldman Sachs and JP Morgan remain today), the gross leverage ratios of European banks today are truly astounding." [continue reading at HussmanFunds.com]
1-Year Greek Bond Yield (source: Bloomberg)
Greece 5Y Credit Default Swap (Source: Bloomberg)