In a filing made through the Irish Stock Exchange, Saxo Bank issued an additional statement revealing that the bank was facing up to $107 million in losses following the Swiss National Bank’s move last week.
In accordance with the terms and conditions of the notes, which SaxoBank placed on the Irish Stock Exchange in November last year, the company has submitted a notification to the holders of the notes informing them in detail about the effects of the Swiss black swan on the company’s capital.
The company explained in the statement that a number of Saxo Bank’s customers ended up with insufficient margin collateral to cover their losses on positions in the Swiss franc.
While the Danish brokerage is still in the process of liaising with all of the firm’s clients to settle the unsecured amounts, some accounts will remain in the negative, as customers will not be able to the settle the balance in full, pushing Saxo Bank to write off the debts.
“Saxo Bank Group estimates the maximum loss that the Bank can incur in relation to the sudden material increase in the price of Swiss Franc on 15 January, 2015, to be DKK 0.7 billion equal to USD 107m on a net basis,” the statement reads.
Elaborating on core tier 1 capital requirements, the firm outlined that it remains very well capitalized:
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Taking the estimated maximum loss into account the Total Capital of Saxo Bank A/S and Saxo Bank Group would be DKK 1.97 billion and DKK 2.15 billion respectively.
The total Capital Requirement are DKK 1.46 billion and DKK 1.71 billion respectively and the CET 1 Capital Buffer would be DKK 0.41 billion and DKK 0.42 billion respectively. In comparison, the CET Capital Buffer was DKK 0.48 billion and DKK 0.44 Billion as of 30 June, 2014.
The CET1 Ratios are 11.9% and 10.7% for Saxo Bank A/S and Saxo Bank Group respectively and the Total Capital Ratios are 16.2% and 14.3%.
In the aftermath of the Swiss franc debacle, Forex Magnates was close in estimating the prospective losses of the Danish multi-asset brokerage, updating its estimates to between around $100 million.
In its 2013 annual report, Saxo Bank unveiled a negative adjustment to its operating income totaling about $38 million at current exchange rates (250 million Danish krone) due to a negative credit risk related to a rapid negative move on a CFD position of a customer of one of Saxo’s white label clients.
While the impact on the company’s balance sheet will be sizable, Saxo Bank’s capital structure will remain solid, even after the adjustment.