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Tag: International Banks

  • Bank of America identifies the next bubble and says investors should sell stocks rather than buy them after the last rate hike

    Bank of America identifies the next bubble and says investors should sell stocks rather than buy them after the last rate hike

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    Another bubble has emerged, courtesy of the bank-sector crisis which has already felled three U.S. regional banks.

    Bank of America analysts led by the Michael Hartnett say money-market funds are the new hot asset.

    They point out that assets under management for money funds has now exceeded $5.1 trillion, up over $300 billion over the past four weeks. They also counted the biggest weekly flows to cash since March 2020, the biggest six-week inflow to Treasurys ever, and the largest weekly outflow from investment-grade bonds since Oct. 2022.

    The last two times money-market fund assets surged — in 2008 and in 2020 — the Federal Reserve slashed interest rates. Hartnett is fond of the saying, “markets stop panicking when central banks start panicking,” and he noted a surge in emergency Fed discount window borrowing has historically occurred around a big stock-market low.

    There is one difference this time, in that inflation is a reality and that labor markets, not just in the U.S. but in other industrialized nations, remains exceptionally strong. The Bank of America team counted 46 interest rate hikes this year, including by the Swiss National Bank after its rescue of Credit Suisse last week.

    History, according to the BofA team, says to sell the last interest rate hike. “Credit and stock markets are too greedy for rate cuts, not fearful enough of recession,” they say. After all, when banks borrow from the Fed in an emergency, they tighten lending standards, which in turn results in less lending, and that leads to less small-business optimism, which eventually cracks the labor market.

    Bond yields
    TMUBMUSD10Y,
    3.311%
    and U.S. stock futures
    ES00,
    -0.84%
    dropped on Friday, as shares of Deutsche Bank tumbled in Frankfurt.

    The S&P 500
    SPX,
    +0.30%
    has gained just under 1% this week.

    See also: Money-market funds swell to record $5.4 trillion as savers pull money from bank deposits

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  • Deutsche Bank shares slump in latest sign of bank worries

    Deutsche Bank shares slump in latest sign of bank worries

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    Deutsche Bank shares slumped on Friday, putting the health of another globally systemic important bank in the spotlight heading into the weekend.

    The German lender’s shares
    DBK,
    -8.53%
    fell 10% in Frankfurt trade, and the Euro Stoxx bank index
    SX7E,
    -4.61%
    fell 5%.

    Deutsche Bank’s 5-year credit-default swaps widened on Thursday, in what Reuters reported was the largest one-day rise in its history. And on Friday, they widened again.

    It should be noted that Deutsche Bank’s 5-year credit-default swap, which was 215 on Friday, is nowhere near the peak for Credit Suisse, which was 1,194, according to S&P Global data. The higher the value of the CDS, the more likely the market sees the issuer defaulting.

    Deutsche Bank’s AT1 bonds have tumbled in value after Switzerland wiped out Credit Suisse’s
    CSGN,
    -5.19%
    securities in the deal for it to be taken over by UBS
    UBSG,
    -3.55%    .

    The Invesco AT1 Capital Bond UCITS ETF
    AT1,
    -1.97%    ,
    which invests in these convertible bonds, has dropped 18% this month as investors lose faith in the securities. European and other banking regulators across the globe have insisted they will not follow Switzerland’s precedent, and first let bank equity fall to zero before wiping out the convertible securities in the event of a failure.

    “It is doubtful that banks will be able to issue new AT1 anytime soon, increasing the likelihood of outstanding AT1 notes being extended. We consider that the recent events in the banking sector have resulted in substantially increased uncertainty, which is likely to continue to be reflected as substantial short-term volatility in credit markets,” said analysts at ING.

    UBS
    UBS,
    -0.94%
    also is feeling the stress in a deal that the banks say might not complete this year. UBS shares dropped 6%.

    Related: Analysts say UBS will face revenue pressure before it can cut Credit Suisse costs.

    Analysts also noted that a foreign institution tapped a Fed facility for $60 billion, according to data released by the U.S. central bank on Thursday. The Fed does not identify the counterparties. Major central banks do have access to swap lines for dollar borrowing from the Fed, meaning that either it was an institution that does not have that capability, or it was one that wanted to do so anonymously.

    Furthermore, Bloomberg News reported the U.S. government was investigating banks including Credit Suisse and UBS for allegedly helping Russians evade U.S. sanctions.

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  • What are CoCos and why are Credit Suisse’s now worth zero?

    What are CoCos and why are Credit Suisse’s now worth zero?

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    The Swiss regulator on Sunday announced that it was writing the value of Credit Suisse’s additional Tier 1 bonds — also called AT1 bonds, or contingent convertible bonds or CoCos — down to zero, as part of the bank’s merger with UBS.

    The news has spooked investors of the AT1 market, which is valued at about $275 billion.

    For more: The $275 billion bank convertible bond market thrown into turmoil after Credit Suisse’s securities wiped out

    But what are Cocos and why should you care? Here’s what you need to know:

    CoCos, or contingent convertible capital instruments, to give them their full name, are hybrid capital instruments that are structured to absorb losses in times of stress. They were introduced after the 2008 financial crisis to help steer risk away from taxpayers and onto bondholders.

    They are bonds that automatically convert into equity—shares in the bank—when a bank’s capital falls below a certain threshold.

    If a bank is functioning normally, investors are paid a coupon, just like any bondholder. But if things go wrong, the bank can “bail in” the CoCo investor, converting debt into shares in what would then be a troubled lender.

    Also read: Saudis, Qataris and Norway to see big losses on UBS deal for Credit Suisse

    European banks liked to issue CoCos, because they are counted as additional Tier 1 capital. They’re a way for banks to improve their capital ratios, as required under rules put in place after the crisis, without issuing more shares.

    U.S. banks don’t issue CoCos—they use a different type of preferred stock to boost their Tier 1 capital. But U.S. investors have been buyers of CoCos for the extra yield they have offered. That’s risky because the instruments can be converted to low-value shares, or entirely wiped out as has now happed with those issued by Credit Suisse
    CSGN,
    -55.74%

    CS,
    -52.98%    .

     CoCos are perpetual bonds, or bonds that have no set maturity date. They can be redeemed if a bank exercises an option to do so, typically after a five-year period. But regulators may block banks from redeeming them, if the cost of issuing replacement debt is much higher. And if a bank becomes highly stressed like Credit Suisse, they can simply be written off.

    A call for Credit Suisse bondholders is expected to take place on March 22, according to law firm Quinn Emanuel Urquhart & Sullivan, which said on Monday it is exploring potential legal actions on behalf of AT1 bondholders.

    The surprise for some investors on Monday is that the Swiss move has wiped out the bondholders but not the shareholders, even though bondholders typically rank above equity holders in capital structure.

    Not the Credit Suisse CoCos, which were structured to allow for the Swiss regulatory move.

    Under the terms of the deal with UBS, Credit Suisse shareholders will be able to exchange their shares for about 0.70 francs, which is below where the stock closed Friday, but more than the bondholders will receive.

    Most of the demand for CoCos in recent years has come from private banks and retail investors, especially in Europe and Asia, along with big U.S. institutional investors who were attracted by the higher yields in the low-interest-rate environment that prevailed from the crisis until the Federal Reserve started raising interest rates last year.

    To be sure, the Credit Suisse CoCos were showing signs of stress last week as the bank became more embroiled in crisis. The bank’s 9.75% coupon CoCo bonds due June of 2028 were trading at an average price of 36 cents on the dollar last Wednesday, as MarketWatch’s Joy Wiltermuth reported.

    Now fund managers say investors are likely to avoid them, undermining their use for banks.

    “The UBS-CS deal might have avoided an immediate risk event, but the AT1 write down has added an uncertainty which could persist for weeks if not months,” said Mohit Kumar, chief financial economist in Europe at Jefferies.

    “Given the large amount of AT1s outstanding, this would also raise the prospect of losses for other investors and the ability of banks to use them as a funding source in the future,” he added.

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  • Credit Suisse shares slump by two-thirds after UBS deal

    Credit Suisse shares slump by two-thirds after UBS deal

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    Credit Suisse shares dropped as much as 65% on Monday after the struggling Swiss bank agreed to be taken over by its rival UBS at a steep discount.

    The decline in Credit Suisse’s shares
    CSGN,
    -54.25%

    CS,
    -52.61%
    mostly reflected the 59% discount it agreed to take in the deal initially valued at 3 billion francs, but also reflected the slide in UBS shares
    UBSG,
    +4.21%

    UBS,
    +4.48%
    after the transaction was announced.

    UBS shares in the afternoon were trading 5% lower, as investors balanced the risks of absorbing Credit Suisse with the future profit potential. UBS expects the deal to lift earnings by 2027 and points out it would have some $5 trillion in invested assets.

    The Euro Stoxx banks index
    SX7E,
    +0.97%    ,
    which doesn’t include UBS or Credit Suisse, fell 1% in see-saw trade.

    Among the worries that stem from the deal was that the Swiss government wrote down the value of what are called AT1 bonds to zero. These bonds, also called contingent convertible bonds or CoCos, have been a key funding source for European banks.

    The Invesco AT1 capital bonds ETF dropped 14%.

    “It has become harder to assess the attractiveness of the current historically large spread pick-up provided by AT1 bonds vs. their [high-yield] corporate counterparts, which will likely constrain the appetite towards the AT1 asset class,” said analysts at Goldman Sachs.

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  • Credit Suisse, UBS, First Republic, and More Stock Market Movers

    Credit Suisse, UBS, First Republic, and More Stock Market Movers

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    This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

    https://www.barrons.com/articles/stock-market-movers-a86267f

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  • Norway’s Oil Fund Has Roughly 1.49% Stake in Credit Suisse, No AT1 Bond Exposure

    Norway’s Oil Fund Has Roughly 1.49% Stake in Credit Suisse, No AT1 Bond Exposure

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    By Dominic Chopping

    Norway’s sovereign wealth fund had a 1.49% stake in Credit Suisse Group AG at the end of 2022 and a 3.31% stake in UBS Group AG, holdings that remain “approximately unchanged,” it said Monday.
    

    UBS yesterday agreed to take over Swiss rival Credit Suisse for more than $3 billion as regulators pushed for the deal in an effort to calm declining confidence in the global banking system.
    

    

    Credit Suisse shareholders will receive one UBS share for every 22.48 Credit Suisse shares held, but holders of around $17.3 billion of additional tier 1 bonds, or AT1s, will receive nothing.
    

    Norges Bank Investment Management, the arm of Norway’s central bank that manages the sovereign-wealth fund, commonly known as the oil fund, said that it doesn’t hold any Credit Suisse AT1 bonds.
    

    Write to Dominic Chopping at dominic.chopping@wsj.com
    

    

    

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  • 
		
		
    
			
    Asian stocks tumble after Credit Suisse takeover
    
			
    Asian stocks tumble after Credit Suisse takeover
    
			
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    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-market futures edge higher after historic deal to rescue Credit Suisse
    
			
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    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%
    

            CL00,
    
        +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.
    

    Read: Why bond-market volatility is at its highest since the 2008 financial crisis amid rolling fallout from banks
    

    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.
    

    

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  • 
		
		
    
			
    Here’s why UBS’s deal to buy Credit Suisse matters to U.S. investors
    
			
    Here’s why UBS’s deal to buy Credit Suisse matters to U.S. investors
    
			
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    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%
    

            COPX,
    
        +0.63%
    

            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
    
			
    UBS to buy Credit Suisse for more than $3 billion in deal backed by Swiss government
    
			
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    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 Said to Offer $1 Billion for Credit Suisse. Here’s Why It Matters.
    
			
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            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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  • 
		
		
    
			
    What’s Going on With First Republic Bank?
    
			
    What’s Going on With First Republic Bank?
    
			
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    First Republic Bank shares have been hit hard over the past week following the failures of two large U.S. regional banks, 
    


Silicon Valley Bank and Signature Bank. On Thursday, shares of the bank and many other financial firms rallied after the biggest banks in the U.S. swooped in to rescue the San Francisco lender. Under the plan, 11 banks including JPMorgan Chase & Co. placed $30 billion in deposits at First Republic, using their own funds, confirming an earlier report by The Wall Street Journal. 
    




    But Friday, shares of First Republic dropped anew, sinking more than 30% and leaving analysts to wonder whether it has a future as a stand-alone bank.
    




    






    






    






    What's News
    






    


















    


    




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  • 
		
		
    
			
    Dow falls 200 points on losses in shares of JPMorgan Chase, Goldman Sachs
    
			
    Dow falls 200 points on losses in shares of JPMorgan Chase, Goldman Sachs
    
			
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    Shares of JPMorgan Chase and Goldman Sachs are retreating Friday morning, sending the Dow Jones Industrial Average into negative territory. The Dow
    
        DJIA,
    
        -1.19%
    
       was most recently trading 199 points (0.6%) lower, as shares of JPMorgan Chase
    
        JPM,
    
        -3.78%
    
       and Goldman Sachs
    
        GS,
    
        -3.67%
    
       have contributed to the index’s intraday decline. JPMorgan Chase’s shares are off $3.52, or 2.7%, while those of Goldman Sachs have dropped $8.17, or 2.6%, combining for an approximately 77-point drag on the Dow. Other components contributing significantly to the decline include American Express
    
        AXP,
    
        -2.62%    ,
    
       Travelers
    
        TRV,
    
        -4.17%    ,
    
       and Caterpillar
    
        CAT,
    
        -1.69%    .
    
       A $1 move in any one of the 30 components of the index equates to a 6.59-point swing.
    

    

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  • 
		
		
    
			
    Credit Suisse shares jump after saying it will borrow from SNB and buy back debt
    
			
    Credit Suisse shares jump after saying it will borrow from SNB and buy back debt
    
			
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    Credit Suisse shares surged 32% in opening trade, rallying as the Swiss banking giant said it will tap its central bank for 50 billion francs ($54 billion) and launching an offer to buy beaten-up debt.
    

    While the stock CH:CSGN CS did get halted for volatility and came off those highs, it demonstrated that the action helped stave off some of the pressures building around the bank, which has lost money for five consecutive quarters.
    

    Other…
    
    

    

    

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  • 
		
		
    
			
    Credit Suisse to borrow about $54 billion from Swiss central bank
    
			
    Credit Suisse to borrow about $54 billion from Swiss central bank
    
			
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    Credit Suisse announced late Wednesday it was taking “decisive action” and borrowing up to 50 billion Swiss francs — about $54 billion — to ease investors’ fears.
    

    The move comes as Credit Suisse stock CS plunged Wednesday to an all-time low, sparking new fears of a global banking crisis.
    

    Read more: Here’s why a failure of Credit Suisse matters…
    
    

    

    

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  • 
		
		
    
			
    Credit Suisse to delay publication of 2022 annual report on SEC comments
    
			
    Credit Suisse to delay publication of 2022 annual report on SEC comments
    
			
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    Credit Suisse Group AG said Thursday that it will delay the publication of its 2022 report after a late call from U.S. market regulators over 2019 and 2020 cash-flow statements, adding a further headache as the lender attempts to woo back clients amid a costly turnaround effort.
    

    The Swiss bank
    
        CSGN,
    
        -5.57%
    

            CS,
    
        +0.35%
    
       said it received a call from the U.S. Securities and Exchange Commission on Wednesday in relation to certain open SEC comments about the technical assessment of previously disclosed revisions to its consolidated cash-flow statements in the 2020 and 2019 fiscal years as well as related controls.
    

    

    “Management believes it is prudent to briefly delay the publication of its accounts in order to understand more thoroughly the comments received,” Credit Suisse said.
    

    The company said it wouldn’t affect its 2022 financial results released early in February.
    

    Credit Suisse’s share price hit a low in the weeks since the 2022 results on uncertainty about its future, with analysts fearing that recent large outflows from customers will hinder a recovery.
    

    Write to Ed Frankl at edward.frankl@wsj.com
    

    

    

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  • 
		
		
    
			
    UBS posts better-than-expected profit, as wealth-management unit brings in $23.3 billion in new client money
    
			
    UBS posts better-than-expected profit, as wealth-management unit brings in $23.3 billion in new client money
    
			
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    UBS Group AG on Tuesday reported a surprise rise in fourth-quarter profit as its wealth-management arm attracted billions in new client money,  offsetting a slump at its investment bank amid macroeconomic headwinds. 
    

    The Swiss bank
    
        UBS,
    
        -0.75%
    

            UBSG,
    
        -2.80%
    
       reported a net profit of $1.65 billion in the three months to the end of December, up from $1.35 billion for the same period a year earlier.
    

    

    Revenue was $8.03 billion compared with $8.71 billion in the fourth quarter of 2021.
    

    It meant the Zurich-based bank beat 4Q estimates of net profit of $1.28 billion and revenue at $7.98 billion, according to analysts’ consensus provided by the company.
    

    UBS said it took on $23.3 billion in net new fee-generating assets at its key wealth-management business in the quarter, at a time when its local rival Credit Suisse Group AG had struggled with client withdrawals.
    

    Profit before tax at wealth management jumped 88% to $1.06 billion, it added.
    

    It also attracted $25 billion in net new money at its asset-management business, UBS said.
    

    But at its investment bank, profit before tax tumbled to around $100 million, down 84%, as dealmaking slumped.
    

    The bank cited persistent inflation, rapid central bank tightening, the Ukraine war, and geopolitical tensions that affected asset-pricing levels and investor sentiment in the year.
    

    “While the macroeconomic outlook remains uncertain, our operational resilience, capital strength and capital generation put us in a great position to serve our clients, fund growth and deliver strong capital returns to shareholders,” Chief Executive Ralph Hamers said.
    

    Its common equity tier 1 ratio, a measure of financial strength, at the end of December was 14.2%, down from 14.4% at the third quarter.
    

    The company said it would propose a dividend of $0.55 for 2022, a 10% year-on-year increase.
    

    The lender added that it would remain committed to a progressive dividend and expects to repurchase more than $5 billion of shares in 2023, after $5.6 billion in 2022.
    

    Write to Ed Frankl at edward.frankl@dowjones.com
    

    

    

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  • 
		
		
    
			
    Dow closes up more than 100 points as earnings season begins, stocks book best week of gains in 2 months
    
			
    Dow closes up more than 100 points as earnings season begins, stocks book best week of gains in 2 months
    
			
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    U.S. stocks finished higher Friday, as investors weighed a flurry of bank earnings results for the fourth quarter and fresh data on consumer sentiment and inflation expectations.  
    

    All three major benchmarks also booked their best weekly percentage gains since Nov. 11, according to Dow Jones Market Data.
    

    

    How stock indexes traded
    

      

    • 
      The Dow Jones Industrial Average
      
        DJIA,
      
        +0.33%
      
       rose 112.64 points, or 0.3%, to close at  34,302.61.
      

      • 

    • 
      The S&P 500
      
        SPX,
      
        +0.40%
      
       added 15.92 points, or 0.4%, to finish at 3,999.09.
      

      • 

    • 
      The Nasdaq Composite
      
        COMP,
      
        -1.10%
      
       gained 78.05 points, or 0.7%, to end at 11,079.16.
      

      • 

    

    For the week, the Dow rose 2%, the S&P 500 advanced 2.7% and the Nasdaq gained 4.8% gain. 
    

    Read: Goldman Sachs sees these ‘prospective’ total returns across assets in 2023
    

    What drove markets
    

    Major stock indexes posted their best week of gains in two months on Friday after companies began reporting their fourth-quarter results, with big banks kicking off the earnings season. 
    

    No big surprises have come from the banks’ earnings results so far, with Bank of America Corp. and JPMorgan Chase & Co. indicating a potentially mild recession this year, according to Anthony Saglimbene, chief market strategist at Ameriprise Financial. 
    

    “I think the base case for most of the market right now is that we’re going to see a mild recession,” Saglimbene said in a phone interview Friday. “I don’t think anything that was said across bank earnings today surprised investors.”
    

    Typically, the release of megabank earnings marks the unofficial start of the U.S. earnings reporting season, and market analysts will be watching closely this quarter for indications of how America’s largest companies are bracing for an expected economic downturn driven by higher interest rates. 
    

    JPMorgan
    
        JPM,
    
        +2.52%    ,
    
       Bank of America
    
        BAC,
    
        +2.20%    ,
    
       Wells Fargo & Co.
    
        WFC,
    
        +3.25%
    
       and Citigroup
    
        C,
    
        +1.69%
    
       were among banks that reported their fourth-quarter earnings Friday. JPMorgan was the top performer in the Dow Jones Industrial Average, with its shares closing 2.5% higher, FactSet data show.
    

    Read: JPMorgan, Wells Fargo, Bank of America and Citi beat earnings expectations, but worries about ‘headwinds’ remain
    

    Earnings will continue to be a “big focus” for markets this month, according to Saglimbene. “Analysts took down estimates pretty aggressively in the fourth quarter,” he said. “So the bar is pretty low for companies. We’ll see if they can hurdle past that.”
    

    In U.S. economic data released Friday, the University of Michigan consumer sentiment index climbed in January to its highest level in nine months, as expectations for the rate of inflation one year out moderated.
    

    “Signs that inflation has peaked and is moderating slowly kind of eases some of the anxiety that we’re going to see runaway inflation this year,” said Saglimbene.
    

    A reading from the consumer-price index on Thursday showed U.S. inflation fell in December. Many investors are expecting that the Federal Reserve will slow its pace of interest rate hikes this year as the cost of living has cooled. 
    

    Read: Inflation slows again and clears path for slower Fed rate hikes
    

    Stocks on Thursday pushed higher after St. Louis Federal Reserve Bank President James Bullard said the probability of a soft landing for the economy has increased due to “encouraging” inflation data.
    

    Read: Why the stock market isn’t impressed with the first monthly decline in consumer prices in more than 2 years
    

    Steve Sosnick, chief strategist at Interactive Brokers, said by phone Friday that he still favors consumer-staples stocks and companies with “more steady streams than more cyclical streams” of income. “If you’re looking at an economy that’s likely to slow down, it’s really hard for me to think that somehow ‘the cyclicals’ will be immune from the economic cycle,” he said. 
    

    Read: Why earnings season could be a ‘market-moving event’
    

    Companies in focus
    

      

    • 
      JPMorgan
      
        JPM,
      
        +2.52%
      
       shares gained 2.5% after reporting fourth-quarter earnings and revenue before the bell that topped Wall Street expectations. The bank said a mild recession is now the “central case.” 
      

      • 

    • 
      Wells Fargo
      
        WFC,
      
        +3.25%
      
       shares rose 3.3% after reporting falling profits, as it was hit by a recent settlement and the need to build reserves. 
      

      • 

    • 
      Bank of America
      
        BAC,
      
        +2.20%
      
       shares gained 2.2% after reporting earnings per share of 85 cents last quarter, above the 77 cents a share expected by analysts. Revenue also beat expectations. However, the bank’s net interest income fell slightly below expectations despite jumping interest rates. 
      

      • 

    • 
      Delta Air Lines Inc.
      
        DAL,
      
        -3.54%
      
       reported fourth-quarter profit and revenue before the bell that beat expectations. Shares of the airline fell 3.5%.
      

      • 

    • 
      Tesla Inc. 
      
        TSLA,
      
        -0.94%
      
       shares fell after the company cut prices in the U.S. and Europe again, according to listings on the company’s website Thursday night. Tesla finished down 0.9%.
      

      • 

    • 
      Shares of UnitedHealth Group Inc.
      
        UNH,
      
        -1.23%
      
        dropped 1.2% after the health-insurance giant shared its results.
      

      • 

    • 
      BlackRock Inc.
      
        BLK,
      
        +0.00%
      
       shares closed about flat after the asset-management giant reported a decline in fourth-quarter results. 
      

      • 

    

    —Barbara Kollmeyer contributed to this article.
    

    

    

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