ExxonMobil: Eyes on the Permian Prize
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Tag: acquisitions
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C3.ai Stock Swoons as Short Seller Alleges Accounting Issues
C3.ai Stock Swoons as Short Seller Alleges Accounting Issues
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Credit Suisse chairman apologizes at final shareholder meeting in 167-year history
“We wanted to put all our energy and our efforts into turning the situation around and putting the bank back on track. It pains me that we didn’t have the time to do so, and that in that fateful week in March our plans were disrupted. For that I am truly sorry. I apologize that we were no longer able to stem the loss of trust that had accumulated over the years, and for disappointing you.
That’s Axel Lehmann, the chairman of Credit Suisse, addressing shareholders after the deal to be purchased at a cut-rate price by UBS, ending 167 years of independence. Shareholders at neither Credit Suisse
CSGN,
+1.39%
nor UBS
UBSG,
+1.20%
will get a chance to vote on the deal.Credit Suisse shares were trading at 0.81 francs, just below the 0.84 franc per share offer the UBS bid is now worth. A year ago, Credit Suisse was worth more than 7 francs per share.
Lehmann, as noted in his speech, was not at the bank for its many scandals and trading debacles, most notably but hardly limited to the losses from the blowup of the Archegos family office and the freezing of funds tied to Greensill.
“The period from October to March was not long enough. One legacy issue after another had already seen trust eroded – and with it, patience dwindled. At that, we failed. It was too late. The bitter reality is that there wasn’t enough time for our strategy to bear fruit,” said Lehmann.
He said the deal “had to go through,” or the bank would have to restructure under Swiss banking law. “This would have led to the worst scenario, namely a total loss for shareholders, unpredictable risks for clients, severe consequences for the economy and the global financial markets,” he said.
CEO Ulrich Körner made a similar apology. “We ran out of time. This fills me with sorrow. What has happened over the past few weeks will continue to affect me personally and many others for a long time to come,” he said.
He specifically tied the collapse of SVB Financial and Signature Bank to its own demise.
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Block Speaks Out Again After Short-Seller’s Claims. The Stock Is Rising.
Block
stock rose Thursday after the payments group responded to some of a short seller’s allegations.Last week, Hindenburg Research disclosed a short position in the company, alleging that Block (ticker: SQ) had inflated user metrics and didn’t rein in illicit activity by users on its Cash App platform. A short position is a bet that a stock will fall: Traders who try it borrow shares of a company and then sell them, hoping to buy them back later at a lower price.
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Sergio Ermotti returns as UBS CEO after Credit Suisse deal
UBS Group AG said Wednesday that it has decided to appoint Sergio P. Ermotti as its new chief executive replacing Ralph Hamers, and said the change is a result of its planned acquisition of rival Credit Suisse Group AG.
The appointment of Mr. Ermotti–who was UBS’s UBS CH:UBSG CEO in the aftermath of the global financial crisis and stepped down in 2020 after nine years in the role–will become effective on April 5, the bank said.
Mr….
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First Citizens enters agreement to buy Silicon Valley Bridge Bank, says FDIC
First Citizens BancShares Inc. has entered a deal to assume all the deposits and loans of the failed Silicon Valley Bridge Bank from the Federal Deposit Insurance Corp., the regulator announced on Monday.
As of Monday, the 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First Citizens
FCNCA,
-1.11% ,
FDIC said. The FDIC has been trying to auction off Silicon Valley Bank for about two weeks, since it became the largest U.S. bank to go bust since Washington Mutual in 2008.As of March 10, Silicon Valley Bridge Bank had approximately $167 billion in total assets and about $119 billion in total deposits, the FDIC said. The deal included the purchase of about $72 billion of Silicon Valley Bridge Bank’s assets at a discount of $16.5 billion.
Roughly $90 billion in securities and other assets will remain in FDIC receivership for disposition, and the regulator has received equity appreciation rights in First Citizens common stock worth up to $500 million.
The FDIC and the Raleigh, North Carolina-based bank entered into a loss–share transaction on the commercial loans it purchased of former Silicon Valley Bridge Bank. The FDIC said it will share in the losses and potential recoveries on the loans covered by that agreement, which is “projected to maximize recoveries on the assets by keeping them in the private sector,” and minimize disruptions for loan customers. First Citizens will also assume all loan–related qualified financial contracts.
The FDIC estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund at roughly $20 billion, the exact cost of which will be determined when receivership is terminated.
The FDIC created Silicon Valley Bridge Bank, National Association, following the closure of Silicon Valley Bank by the California Department of Financial Protection and Innovation.
Speculation that First Citizens, which has bought 20 failed banks since 2009, was pursuing an acquisition of Silicon Valley National Bank emerged last week. Bloomberg, which first reported First Citizens would enter a deal for the bank on Sunday, also reported that Valley National Bancorp
VLY,
+2.87%
was trying to purchase the failed bank. It said First Citizens had previously made an offer for the bank immediately after it collapsed.First Citizens shares have sunk 23% year to date — mostly over the past month — and are down 15% over the past 12 months, compared to the S&P 500’s
SPX,
+0.56%
3.4% gain in 2023 and 13% decline over the past year. -
How First Republic stock’s tailspin started and why it hasn’t stopped
Shortly after Silicon Valley Bank disclosed on March 8 that it was running short of cash and needed to raise capital, First Republic Bank’s epic stock slide began.
The stock
FRC,
-15.47%
has lost 90% of its value in less than two weeks, hitting an all-time low of $12.18 a share on Monday.Supportive comments from Treasury Secretary Janet Yellen helped it snap back on Tuesday, but it’s hovering between positive and negative territory on Wednesday as investors await a key Federal Reserve decision on interest rates.
First Republic finds itself in a tough spot with a low share price and fresh debt downgrades and not even efforts to inject $30 billion into the company’s deposits in a scheme backed by JPMorgan Chase & Co.
JPM,
-2.58%
and a backstop from the U.S. Federal Reserve seem to be helping.The bank’s troubles stem from its overlap both in clientele and parts of its balance sheet with doomed Silicon Valley Bank, which is being sold off this week by the Federal Deposit Insurance Corp. after it officially failed on Friday, March 10. Silicon Valley Bank suffered a classic run on a bank, when depositors, nervous that it needed to raise capital, yanked their deposits.
First Republic has suffered the same deposit flight.
As a San Francisco bank with a focus on serving high-end clients, First Republic has acted as wealth manager for the greater Silicon Valley region of executives, managing directors and startup CEOs, as well as their counterparts on the East Coast.
The list incudes Facebook
META,
-1.16%
Founder Mark Zuckerberg, who has a large mortgage courtesy of First Republic, as the Wall Street Journal has reported. Few of its loans ever sour — it had $213 billion in assets at the end of 2022 and $176 billion in deposits.With its sophisticated lending products and access to the technology startup world, Silicon Valley Bank was also known for its a customer base from the venture capital and private equity world.
Also Read: 24 bank stocks that contrarian bottom-feeders can feast on now
Those well-heeled clients of both banks started running into problems as interest rates rose last year, pundits warned of an economic slowdown and investors switched to a risk-off strategy of conserving cash and containing costs.
The collapse of FTX and strain in the crypto world also fed the need for cold, hard government-backed currency. Rising interest rates made it more expensive to borrow and put a chill on the deal-making environment.
All of this and other factors led to a drain on deposits at Silicon Valley Bank and others as it faced “elevated client cash burn” at a rate that was double pre-2021 levels, even as venture capital and private equity funds were slowing down their capital raising activities, the company said in an ill-fated mid-quarter report.
On March 8 after the market close, Silicon Valley Bank said it planned to sell $2.25 billion in common stock and a type of preferred stock, with one of its major clients, private equity firm General Atlantic, in line to buy $500 million worth. Goldman Sachs Group Inc.
GS,
-1.14%
was handling the deal.The company also disclosed that it had lost $1.8 billion on the sale of $21 billion in available-for-sale securities on its balance sheet to cover deposit withdrawals.
It was this last part that caused big trouble for First Republic. Not only did its clientele overlap with Silicon Valley Bank, its holdings included some of the same securities that Silicon Valley Bank sold at a loss.
Wall Street investors quickly started bidding down shares of First Republic and other regional banks and the credit rating agencies moved in, cutting the bank’s rating from investment grade deep into junk in just a few days.
None of this helped First Republic hold on to its deposits.
As one longtime banking official said recently, money from Silicon Valley types typically comes in the form of uninsured deposits, which means they’re in excess of the $250,000 that the FDIC will guarantee if a bank goes out of business. This so called hot-money is great for banks when times are good, but can move away quickly if the environment changes.
“When hot money gets nervous, it runs,” former FDIC chairman Bill Isaac told MarketWatch recently.
While an unprecedented effort on March 16 by 11 banks to inject $30 billion into First Republic’s deposits temporarily provided a lift to its stock, the move apparently wasn’t enough.
First Republic said last Thursday that it had borrowed between $20 billion and $109 billion from the Federal Reserve during that week. It also increased short-term borrowing from the Federal Home Loan Bank by $10 billion at a rate of 5.09%.
Jefferies analyst Ken Usdin said the numbers revealed that First Republic’s total deposits had dropped by up to $89 billion in the week ended March 17 past week—or about three times more than the $30 billion injection from the bank.
“With [First Republic’s] earnings profile clearly impaired, the new deposits effectively bridge the estimated $30.5 billion of uninsured deposits still on [the bank’s] balance sheet, providing time for [it] to likely explore a sale,” Usdin said.
Janney Montgomery Scott analyst Tim Coffey said First Republic’s stock drop in recent days reflects uncertainty around what a potential second bailout would look like, or how the bank’s balance sheet is faring after a steep run in deposits and the falling value of its long-dated securities.
Another unknown is the company’s latest Tier 1 capital Ratio, a key measure of a bank’s balance sheet strength.
Like Silicon Valley Bank, First Republic’s balance sheet has had more than the usual exposure to long-dated securities, which have been falling in value as interest rates rise.
A typical mix for a bank of comparable size is to hold about 72% of securities as available for sale. The remaining 28% are held to maturity. First Republic’s mix is reversed with 12% available for sale and 88% held to maturity.
The bank’s mix of longer-dated assets now commands a lower market value, given where interest rates are. The bank’s emphasis on long-dated securities provided a better return when interest rates were near zero, but they have been a liability in the current environment.
“They’ve had duration risk where the value of their securities started going down as interest rates rose,” Coffey told MarketWatch.
Another problem for First Republic is that many of those long-dated securities are in the mortgage business, which has been ailing as interest rates rise.
Plenty of questions remain about First Republic’s situation and whether it could have been avoided. The challenges facing First Republic as well as the demise of Silicon Valley Bank and Signature Bank will be the focus of hearings on Capitol Hill next week.
Wall Street is also awaiting comments from the U.S. Federal Reserve when it updates its interest rate policy later on Wednesday.
And JPMorgan Chase continues to work with First Republic on a potential bailout, even as the bank has reportedly hired Lazard
LAZ,
-2.17%
to weigh strategic alternatives.All of these factors add to the uncertainty swirling around First Republic, giving investors little reason to go long on the stock for now.
Also Read: 24 bank stocks that contrarian bottom-feeders can feast on now
Related: Senate Banking Chair Sherrod Brown sees bipartisan support for changes to deposit insurance
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UBS Erases Losses as Investors Weigh Credit Suisse Deal Impact | Bank Automation News
UBS Group AG erased losses while investors digested the drawbacks and potential upside of its Credit Suisse Group AG takeover, a deal that forces it to wind down assets and restructure while handing over valuable assets at a bargain price. The government-brokered, 3 billion Swiss franc ($3.2 billion) deal signed late Sunday was intended to […]
Bloomberg News
Source link -
Asian stocks tumble after Credit Suisse takeover
BEIJING (AP) — Asian stock markets fell Monday after Swiss authorities arranged the takeover of troubled Credit Suisse amid fears of a global banking crisis ahead of a Federal Reserve meeting to decide on more possible interest rate hikes.
Shanghai, Tokyo and Hong Kong declined. Oil prices retreated, and U.S. equity futures were tilting lower after initially rising on the takeover news.
Swiss authorities on Sunday announced UBS would acquire its smaller rival as regulators try to ease fears about banks following the collapse of two U.S. lenders. Central banks announced coordinated efforts to stabilize lenders including a facility to borrow U.S. dollars if necessary.
Investors worry banks are cracking under the strain of unexpectedly fast, large rate hikes over the past year to cool economic activity and inflation. That caused prices of bonds and other assets on their books to fall, fueling unease about the industry’s financial health.
“Investors are waiting to see where the dust settles on the banking saga before making any bold moves,” Stephen Innes of SPI Asset Management said in a report.
The Hang Seng
HSI,
-2.65%
in Hong Kong lost 3% to 18,920 and the Nikkei 225
NIK,
-1.42%
in Tokyo shed 1.2% to 26,990.25.The Shanghai Composite Index
SHCOMP,
-0.48%
lost 0.2% to 3,241 after the Chinese central bank on Friday freed up additional money for lending by reducing the amount of money commercial are required to hold in reserve. Hong Kong shares of HSBC
5,
-6.23%
dropped over 6%.The Kospi
180721,
-0.69%
in Seoul retreated 0.6% to 2,382.03 and Sydney’s S&P-ASX 200
XJO,
-1.38%
lost 1.4% to 6,900.00.India’s Sensex opened down 1.1% at 57,341.79. New Zealand and Southeast Asian markets also declined.
The Swiss government said UBS will acquire Credit Suisse for almost $3.25 billion after a plan for the troubled lender to borrow as much as $54 billion from Switzerland’s central bank failed to reassure investors and customers.
U.S. regulators have also sought to calm fears over threats to banking systems. The Federal Reserve said cash-short banks had borrowed about $300 billion from the Federal Reserve in the week up to Thursday.
Separately, New York Community Bank
NYCB,
-4.66%
agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday. The FDIC said $60 billion in Signature Bank’s loans will remain in receivership and are expected to be sold off in time.Concerns persist about other lenders with shaky finances. Credit Suisse is among 30 institutions known as globally systemically important banks. Ahead of its takeover, Wall Street’s benchmark S&P 500 index
SPX,
-1.10%
lost 1.1% on Friday to 3,916.64.Shares of First Republic Bank
FRC,
-32.80%
sank nearly 33% to bring their plunge for the week to 71.8%.The Dow Jones Industrial Average
DJIA,
-1.19%
lost 1.2% to 31,861.98. The Nasdaq Composite
COMP,
-0.74%
fell 0.7% to 11,630.51. Dow futures
YM00,
-0.70%
fell 0.3% early Monday, while S&P 500 futures
ES00,
-0.60%
and Nasdaq-100 futures
NQ00,
-0.33%
were steady.The unexpectedly large, fast rate hikes by the Fed and other central banks to cool inflation that is close to multi-decade highs have caused prices of bonds and other assets on their books to fall.
Traders expect last week’s turmoil to push the Fed to limit a rate hike at its meeting this week to 0.25 percentage points. That would be the same as the previous increase and half the margin traders expected earlier.
A survey released Friday by the University of Michigan showed inflation expectations among American consumers are falling. That matters to the Fed, which has said such expectations can feed into virtuous and vicious cycles.
In energy markets, benchmark U.S. crude
CL.1,
-3.27%
sank 93 cents to $64.81 in electronic trading on the New York Mercantile Exchange. The contract fell $1.61 on Friday to $66.74. Brent crude
BRN00,
-3.29% ,
the price basis for international oils, declined $1.05 cents to $71.92 per barrel in London. It retreated $1.73 the previous session to $72.97.The dollar
DXY,
+0.13%
gained to 131.83 yen from Friday’s 131.67 yen. The euro
EURUSD,
-0.11%
declined to $1.0676 from $1.0681.MarketWatch contributed to this report.
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U.S. stock-market futures edge higher after historic deal to rescue Credit Suisse
U.S. stock-index futures opened with modest gains Sunday evening as investors assessed a historic deal to rescue troubled Swiss lender Credit Suisse, the latest maneuver by authorities attempting to prevent a deeper loss of confidence in the global banking system.
Swiss bank UBS Group
UBS,
-5.50%
agreed to buy rival Credit Suisse
CS,
-6.94% CSGN,
-8.01%
for more than $3 billion, a substantial discount to its Friday closing price, in a deal shepherded by Swiss regulators and closely watched by monetary and economic policy makers around the world.Don’t miss: Here’s why UBS’s deal to buy Credit Suisse matters to U.S. investors
Also Sunday, the Federal Reserve and five other major central banks announced they were taking steps to ensure that U.S. dollars remained readily accessible throughout the global financial system.
Futures on the Dow Jones Industrial Average
YM00,
+0.64%
rose 123 points, or 0.4%, while futures on the S&P 500
ES00,
+0.65%
and Nasdaq-100
NQ00,
+0.42%
were also up 0.4%,Oil futures ticked higher after suffering their worst week of 2023 and ending Friday at their lowest since December 2021, with analysts tying the plunge largely to rising recession fears. April West Texas Intermediate crude
CL.1,
+0.55% CLJ23,
+0.55%
rose 0.3% to $66.92 a barrel on the New York Mercantile Exchange, while May Brent crude
BRN00,
+0.52% ,
the global benchmark, ticked up 0.1% to $73.05 a barrel on ICE Futures Europe.The positive initial tone in markets late Sunday was reflected in a weaker tone for the Japanese yen, which has seen haven-related support this month on rising banking worries. The U.S. dollar was up 0.3% versus the Japanese currency
USDJPY,
+0.60%
at 132.18 yen. The ICE U.S. Dollar Index
DXY,
+0.08% ,
a measure of the currency against a basket of six major rivals, was up 0.1%.Futures on U.S. Treasurys
TY00,
-0.82% ,
which also tend to serve as a haven during periods of crisis, were slightly lower. Treasurys rose sharply last week, dragging down yields, which move opposite to price, in volatile trading.Credit Suisse’s 167-year run came to an end after a collapse in the value of its shares and bonds last week. Economists, investors and authorities worried that a collapse by Credit Suisse could amplify contagion fears in the global banking system after the demise earlier this month of California’s Silicon Valley Bank, or SVB.
Economists expect U.S. banks to significantly tighten lending standards in response to the upheaval, raising the odds of the economy falling into recession.
The Tell: ‘Hard landing’ in store for U.S. economy as bank crisis intensifies: economist
As a result, fed-funds futures traders abandon expectations for a return to a supersized 50-basis-point, or half-percentage-point, rise in the Fed’s benchmark interest rate when policy makers complete a two-day meeting on Wednesday. The market at the end of last week showed traders saw a nearly 75% chance of a 25-basis-point hike, and a roughly 25% chance the Fed would hold rates unchanged.
Traders also priced in the potential for significant rate cuts by the end of the year, signaling rising recession expectations. Those shifting expectations helped drive the Treasury rally, particularly for the policy-sensitive 2-year note
TMUBMUSD02Y,
4.003% .Analysts said the Fed may be reluctant to hold off on a rate hike this week given still-elevated inflation readings and data so far that that shows the job market remains tight. Some economists see the Fed echoing the European Central Bank’s lead from last week, when it followed through with an earlier pledge to hike rates by 50 basis points while making clear that further rate moves would depend on future developments and data.
Don’t miss: What’s at stake for stocks, bonds as Federal Reserve weighs bank chaos against inflation fight
“While the Fed is obviously wary of contagion risks, it still views the banking sector as being well-capitalized, and it will want to stress that the inflation battle is not won, and it remains too high, so a 25-bps hike seems very likely, though like the ECB it will likely stress a high level of uncertainty, and offer no guidance, and emphasize data and financial conditions dependency,” said Marc Ostwald, London-based chief economist and global strategist at ADM Investor Services, in a note.
Despite efforts by the Fed and other U.S. regulators to ringfence SVB and a pair of other collapsed banks while moving to backstop deposits, other regional banks have faced significant pressure. While all depositors at those banks were made whole, calls have increased for the U.S. to formally remove a $250,000 cap on insured deposits.
Meanwhile, First Republic Bank
FRC,
-32.80%
saw its credit rating downgraded further into junk territory by S&P Global Ratings, news reports said. The ratings firm cut the bank’s credit rating three notches to B-plus from BB-plus and warned further downgrades were possible, according to Reuters.First Republic has been a top concern for investors and regulators following the collapse of SVB. Last week a group of 11 large banks agreed to provide a combined $30 billion in deposits to First Republic in an effort to shore up confidence in the lender. Shares of First Republic have plunged more than 80% so far in March.
U.S. stocks ended lower Friday amid banking sector fears, with the Dow
DJIA,
-1.19%
booking back-to-back weekly losses.The S&P 500
SPX,
-1.10%
rose 1.4% last week, while the technology-heavy Nasdaq Composite
COMP,
-0.74%
climbed 4.4% in its biggest weekly percentage gain since January, according to Dow Jones Market Data. -
Flagstar Bank to take over most of Signature Bank’s deposits, FDIC says
Flagstar Bank, a subsidiary of New York Community Bankcorp Inc., on Sunday agreed to assume most of Signature Bank’s deposits and some of its loans.
New York-based Signature Bank was closed by regulators last week, following the failures of Silicon Valley Bank and Silvergate Bank.
In a statement Sunday, the Federal Deposit Insurance Corp. said Flagstar will take over Signature’s 40 former branches effective Monday, and they will operate as normal.
Signature Bank depositors will automatically become Flagstar depositors, the FDIC said, with all deposits insured up to their limits. About $4 billion in deposits related to Signature’s digital banking business is not included in the deal, and the FDIC will provide those deposits directly to customers.
Sunday’s deal includes the purchase of about $38.4 billion in assets from the former Signature Bank, including loans of $12.9 billion purchased at a discount of $2.7 billion.
About $60 billion in Signature’s loans will remain in receivership for later disposition by the FDIC. The FDIC also received equity appreciation rights in New York Community Bancorp
NYCB,
-4.66%
common stock with a potential value of up to $300 million.The FDIC estimated that the cost of the failure of Signature Bank to its Deposit Insurance Fund will be about $2.5 billion.
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Here’s why UBS’s deal to buy Credit Suisse matters to U.S. investors
Thousands of miles away from U.S. shores last Wednesday, a headline began working its way across Europe, then Wall Street, sparking fresh panic as it dawned on investors that they may be facing yet another banking crisis.
Shares of Credit Suisse
CS,
-6.94% CSGN,
-8.01%
would eventually sink 25% last week to a fresh record low, unable to find footing days after the head of top shareholder Saudi National Bank said they won’t invest any more in the bank. By Sunday, the struggling Swiss bank had a new owner, leaving investors to wonder if at least one chapter in a current roller coaster of global banking stress can be closed.Swiss authorities steered rival UBS AG
UBS,
-5.50%
to an all-stock deal worth 3 billion francs ($3.25 billion), or 0.76 francs per share, a not-so-slight discount to the 1.86 franc close on Friday of Credit Suisse. So important was the agreement, it was announced by Switzerland’s President Alain Berset, with both banks and the chairman of the Swiss National Bank on either side of him.“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” the SNB said in a statement.
The Swiss National Bank said either Swiss bank can borrow up to 100 billion francs in a liquidity assistance loan, and Credit Suisse will get a liquidity assistance loan of up to 100 billion francs, backed by a federal default guarantee. The U.S. Federal Reserve had worked with its Swiss counterpart on the deal as well.
“We welcome the announcements by the Swiss authorities today to support financial stability. The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient,” said a statement Sunday by Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell.
European Central Bank President Christine Lagarde also praised Swiss authorities for “restoring orderly market conditions and ensuring financial stability,” while reiterating the “resilience” of the euro-area banking sector. She said the ECB stands ready to provide liquidity if needed.
Her comment comes days after the the ECB pulled the trigger Thursday on a 50-basis-point rate hike, as it warned “inflation is projected to remain too high for too long.”
The deal for Credit Suisse comes in the wake of stress on the U.S. banking sector, triggered by the collapse of Silvergate Bank, Silicon Valley Bank and Signature Bank, all within the space of a week.
“Virtually everyone at this high-level Swiss press conference — government officials, regulator, central bank governor, and executives of the two banks — blamed the US banking sector turmoil for being the catalyst for the financial turmoil in #Switzerland,” tweeted Mohamed A. El-Erian, chief economic adviser at Allianz, of the press conference Sunday with Swiss authorities to announce the deal.
And for U.S. investors who have had quite enough anxiety lately, a logical question would be to ask if the deal that brings together the two Swiss banking giants will now remove one layer of stress from global markets, and hence Wall Street.
For that reason, many will be watching how Asian and U.S. equity futures trade later on Sunday, as well as Europe’s opening reaction on Monday.
The Credit Suisse news may only go so far to assuage investors, with some raising an eyebrow over Powell and Yellen’s Sunday statement about the Swiss deal. “Seriously, if everyone truly believed the ‘The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient’ … Would they have to tell us? Are these words enough?” said Jim Bianco, president of Bianco Research, on Twitter. “Or do investors want to see Warren Buffett writing checks to regional banks in the next two hours (before Asia opens)?”
Fox News and other media outlets reported over the weekend that the Berkshire Hathaway
BRK.A,
-2.76% BRK.B,
-2.81%
chairman and CEO had been talking to President Joe Biden’s administration in recent days over possible investments in the battered regional bank sector, and offering his advice.The billionaire investor was responsible for a capital injection to Bank of America
BAC,
-3.97%
in 2011 as its shares tumbled due to subprime mortgages, as well as $5 billion to Goldman Sachs
GS,
-3.67%
amid the 2008 financial crisis.Some had said ahead of the deal last week that global-market stability depended on the Swiss first getting their house in order.
“I don’t think there are any direct consequences for U.S. investors, but it’s extremely negative for sentiment if a major Swiss bank fails, hot on the heels of SVB/SBNY,” Simon Ree, the founder of Tao of Trading options academy school and author of the book by the same name, told MarketWatch last week.
“The market will be (temporarily) wondering who’s next. It could start to have the optics of a global banking crisis, rather than an idiosyncratic failure of a niche U.S. regional bank,” said Ree.
Credit Suisse’s troubles came amid a revamp and five straight money-losing quarters, following a painful legacy that included billions worth of exposure to the collapsed Archegos family office and $10 billion worth of funds tied to Greensil Capital it had to freeze.
Read: In its delayed annual report, Credit Suisse admitted to financial control weaknesses
“The SNB and the Swiss government are fully aware that the failure of Credit Suisse or even any losses by deposit holders would destroy Switzerland’s reputation as a financial center,” said Otavio Marenzi, CEO of Opimas, a management consulting firm focused on global capital markets, in a note to clients last week.
The bank’s plummeting stock price and soaring bond yields was “mimicking Silicon Valley Bank’s recent collapse in a frightening way. In terms of the outflow of deposits, Credit Suisse’s position looks even worse,” said Marenzi.
Over there?
As far as some are concerned, the market may have more stress ahead of it.
“The SVB failure highlights the potential for other skeletons to be hidden in closets and the market will spend the next few weeks/months hunting them out. Even just the extreme volatility we’ve seen on bond markets the last five days renders any attempt to ascribe a value to other asset classes redundant,” said Ree.
Plus: Here’s what’s really protecting your bank deposits
His view is shared by many analysts, who in part point to increasing uncertainty around how the Federal Reserve will react going forward as it tries to balance market and economic risks. Some now see full percentage rate cuts by year-end, amid banking stress.
Samantha LaDuc, the founder of LaDucTrading.com who specializes in timing major market inflections, said she stands by her advice (that she shared with MarketWatch in February) that investors are being “paid to wait,” by staying in cash.
Read: Looking for a place for your cash? Grab these 5% CDs while you still can.
“I have been literally recommending and tweeting to clients that we are PAID TO WAIT in T-bills at 5% until [the] bond market can figure out if we have recession or not. All that happened last week pulled forward recession risk,” she told MarketWatch.
Prior to the SVB crisis, she had been recommending clients short reflation trades, such as banks
XLF,
-3.22% KRE,
-5.99% ,
energy
XLE,
-1.57%
and metals and mining
XME,
-0.78% SLX,
-1.96% ,
and has been saying she sees “unattractive risk-reward for either stocks or bonds.”Opimas’ Marenzi said the threat to Wall Street from Credit Suisse was simple:
“You mean what do American investors who do not own any non-American stocks and do not own a passport and could not find Switzerland on a map and who think that anyone who speaks any language other than English is a bit weird have to worry about? Not a lot, other than the contagion spreading back into the US banking system and causing a meltdown,” he told MarketWatch.
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UBS to buy Credit Suisse for more than $3 billion in deal backed by Swiss government
Struggling Swiss banking giant Credit Suisse has agreed to be bought by its arch-rival UBS at a discount to Friday’s close price, after seeing a wave of customer deposits exit the bank.
The deal was announced by Switzerland’s president, Alain Berset, flanked by executives from both banks and the chairman of the Swiss National Bank.
“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” the SNB said in a statement.
UBS
UBS,
-5.50%
will buy Credit Suisse
CS,
-6.94%
for 3 billion francs ($3.25 billion), or 0.76 francs per share, in an all-stock deal, the bank announced.That compares to Credit Suisse’s
CSGN,
-8.01%
closing price of 1.86 francs on Friday. The FT reported UBS initially bid just 0.25 francs per share.UBS said it benefits from 25 billion francs of downside protection from the transaction to support marks, purchase price adjustments and restructuring costs, and additional 50% downside protection on non-core assets.
The deal does not need shareholder approval. The Swiss financial regulator said Credit Suisse’s AT1 securities, worth 16 billion francs, will be entirely written down.
Credit Suisse chairman Axel Lehmann (L) and UBS Chairman Colm Kelleher (R) look on prior to a press conference.
fabrice coffrini/Agence France-Presse/Getty Images
“This is a commercial solution and not a bailout,” said Karin Keller-Sutter, the Swiss finance minister. “Bankruptcy would have been the highest risk.”
The Swiss National Bank said either UBS or Credit Suisse can borrow up to 100 billion francs in a liquidity assistance loan, and Credit Suisse can also receive a liquidity assistance loan of up to 100 billion francs. backed by a federal default
guarantee.The Federal Reserve has been working with its Swiss counterpart on the deal, as both banks have major operations in the U.S.
Keller-Sutter said she held talks with U.S. Treasury Secretary Janet Yellen and U.K. Chancellor Jeremy Hunt. Keller-Sutter said “many thousands” of Credit Suisse will be affected, pointing to job cuts ahead.
UBS said the combination of the two businesses is expected to generate annual run-rate of cost reductions of more than $8 billion by 2027. UBS Chairman Colm Kelleher said the investment bank will represent no more than 25% of risk-weighed assets.
Credit Suisse’s downfall occurred just days after the collapse of U.S. banks SVB Financial and Signature Bank. While Credit Suisse, as well as Swiss authorities, said they didn’t have the same kinds of problems, they also saw customers leave. After wealthy clients withdrew roughly $100 billion from Credit Suisse in the fourth quarter, they again began to see big outflows last week, the FT reported.
Credit Suisse has lost money for five consecutive quarters, reeling from losses to family office Archegos as well as having to freeze $10 billion of supply chain funds sold through the bank that were managed by Greensill Capital.
Also read: Saudis, Qataris and Norway to see big losses on UBS deal for Credit Suisse
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UBS Said to Offer $1 Billion for Credit Suisse. Here’s Why It Matters.
UBS
Group has offered to buy Credit Suisse Group for up to $1 billion, the Financial Times reported on Sunday.The report said regulators are rushing to complete a deal for
Credit Suisse
(ticker: CS) before financial markets open on Monday. A merger of Switzerland’s two largest banks comes against a backdrop of industry turmoil. The potential end of the storied bank shows how far and how quickly worries have spread about the financial sector. -
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Silicon Valley Bank branches closed by regulator in biggest bank failure since Washington Mutual
Silicon Valley Bank has been closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (FDIC) has been appointed receiver, becoming the first FDIC-backed institution to fail this year.
The news comes amid a crisis at parent SVB Financial Group
SIVB,
-60.41% ,
which lost a record 60% of its value on Thursday, after it disclosed large losses from securities sales and announced a dilutive stock offering along with a profit warning. The stock was halted premarket Friday amid reports the company was seeking a buyer.The FDIC, which insures deposits of up to $250,000 at eligible banks, said all insured depositors will have full access to their accounts no later than Monday morning. Uninsured depositors will get a receivership certificate and may be entitled to dividends once the FDIC sells the bank’s assets.
The bank had 13 branches in California and Massachusetts and will reopen on Monday. As of Dec. 31, it had about $209 billion in total assets, and about $175.4 billion in deposits.
That makes it the biggest bank failure since Washington Mutual Inc. was brought down during the financial crisis of 2008.
See now: 10 banks that may face trouble in the wake of the SVB Financial Group debacle
“At the time of closing, the amount of deposits in excess of the insurance limits was undetermined,” said the FDIC. “The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.”
Read: Treasury monitoring a few banks ‘very carefully’ amid Silicon Valley Bank’s woes, Yellen says
Related: Silicon Valley Bank collapse a cautionary tale, says New Constructs
Customers with more than $250,000 in their accounts should contact the FDIC at 1-866-799-0959.
The last FDIC-backed bank to close was Almena State Bank, Almena, Kansas, back in October of 2020, said the FDIC.
The bank’s collapse has come swiftly just days after the parent announced a huge loss on bondholdings after it was caught out by interest rate increases. Some venture-capital firms reportedly told their startup clients to pull their money from the bank, triggering a classic run on the bank.
On Friday, employees were told to “work from home today and until further notice,” the Wall Street Journal reported, citing an email it had obtained.
