The first criminal charges in over a decade against a bank in the US for Credit Suisse is setting US markets up for a lower open ahead of a day of Fed speak and more retail earnings from Home Depot and Staples. Futures suggest the S&P500 will open 1 point lower at 1,884 with the Dow Jones expected to open 5 points lower at 16,506.Credit Suisse has pleaded guilty to helping clients evade taxes and will pay a fine of $2.6bn. Importantly the bank has kept its US banking license enabling it to continue doing business in the country. Despite keeping its licence, some HNW individuals and institutions will likely discontinue business with CS of their own volition now that the bank has been found officially guilty of a crime. Results from Credit Suisse next quarter will take on additional significance. If clients are seen to be leaving, this may set the precedent for clients of all global banks to head to the exits and seek out boutique firms to manage their wealth instead. With investment banking revenues declining, the loss of wealth management on top would be another blow to the profitability of global banks. Regulators are likely feeling happy with themselves at a big win against white collar crime but in reality the fact that the bank has kept its banking licence highlights how tied the hands of regulators are against this ‘too big to fail’ industry. The regulators can’t stop the TBTF banks from doing business despite a proven record of criminality because of the ‘Lehman Brothers type’ risk to counterparties and the system as a whole. Home Depot is expected to earn 99c per share on revenues of $19.95bn Staples is slotted to report earnings of 21c per share on revenue of $5.62bn
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