Bloomberg today published this article on deposit flight from weaker to stronger members of the Eurozone banking fraternity.

One might wonder if there is a relative value opportunity in this – for example, long one of the beneficiary banks in the Netherlands, France or Germany and short a bleeder in Italy, Greece, Spain or Ireland.

Minimal research suggests, for example, the Dutch subsidiary of the Royal Bank of Scotland (RBS) versus Credito Emiliano Spa (CE). However, RBS N.V has flight issues of its own – the parent is shuffling deposits from Amsterdam to London doubtless for the usual purpose of enhancing shareholder value.

Moreover, Credito Emiliano S.p.A does not (if you believe analyst sentiment) look that bad next to RBS (possibly not the best acid test anyway).

So, casting around elsewhere with the view that the Eurozone banks are all pretty much going to sink or swim as a group in the current crisis, perhaps setting CE against France’s Caisse régionale de Crédit Agricole mutuel de Paris et d’Ile de France (CAF - praise be to abbreviations) is worth a thought.

Nothing particularly wrong with CAF – nice, solid roots as an agricultural cooperative bank. But it is owned by Crédit Agricole whose fortunes it mirrors. Happily this latter now repents, as only true sinners can, the days it strayed so far from its roots into derivative instruments and dodgy Greek and Italian investments. Management appear sincere converts.

Usual disclaimers plus a small graph to round things off:


Entering long CAF, short CE territory


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