Tag: regulation

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.

Source link

March 26, 2023
Lululemon, Intel, Carnival, Micron, Walgreens, and More Stocks to Watch This Week

Data on the U.S. consumer and housing market, plus several notable earnings reports, will be this week’s highlights. Barring any surprises, federal financial regulators’ Congressional testimony will be the main event on the banking front.

On Wednesday, Fed Vice Chair for Supervision Michael Barr and Federal Deposit Insurance Corp. Chairman Martin Gruenberg are scheduled to testify before the House Financial Services Committee. They’ll discuss the collapses of Silicon Valley Bank and Signature Bank and efforts to maintain confidence in the U.S. banking system.

Source link

March 26, 2023
Dow, S&P 500 post modest gains Thursday as investor focus returns to banking risks

U.S. stocks ended modestly higher Thursday in choppy trade as worries about potential weakness in the banking system resurfaced a day after the Federal Reserve increased hikes by 25 basis points. The Dow Jones Industrial Average
DJIA,
+0.23%
rose about 73 points, or 0.2%, ending near 32,103, down about 400 points from the session’s high. The S&P 500 index
SPX,
+0.30%
gained 0.3% and the Nasdaq Composite Index
COMP,
+1.01%
closed up 1%, according to preliminary figures from FactSet. Stocks closed off the session’s highs, but gained ground after Treasury Secretary Janet Yellen told a Senate committee that the federal government would take extra steps to stabilize the U.S. banking system, if necessary. Stocks closed sharply lower Wednesday after the Fed raised its policy rate to a range of 4.75% to 5%, up a year ago from close to zero. But some analysts said a catalyst of the selloff was comments from Yellen indicating she wasn’t yet considering ways to guarantee all bank deposits, despite regulators providing an exception to depositors in Silicon Valley Bank and Signature Bank, which failed earlier this month. Sheila Bair, who ran the Federal Deposit Insurance Corp. from 2006 to 2011, told MarketWatch on Thursday that the focus should be on underwater securities at all banks, not only regional lenders.

Source link

March 23, 2023
‘This is a risk confronting all banks,’ ex-FDIC chief Sheila Bair tells MarketWatch

Regional banks shouldn’t be the only source of worry for potential fallout from the Federal Reserve’s rapid pace of interest-rate hikes in the past year, said a former top banking regulator.

“I don’t see regional banks as having any particular problem,” said Sheila Bair, who ran the Federal Deposit Insurance Corp. from 2006 to 2011, in an interview with MarketWatch on Thursday. “We need to be mindful of all unmarked securities at banks — small, medium and large.”

Bair called the hyperfocus on regional banks and interest-rate risks “counter productive” in the wake of the collapse earlier in March of Silicon Valley Bank and Signature Bank
SBNY,
-22.87%
of New York.

“This is a risk confronting all banks,” she said. “All examiners need to be on alert for how interest-rate risk is being managed. If there is a run, they will need to sell these securities. Those are the kinds of things all-size banks, and all examiners should be worried about.”

A run on deposits at Silicon Valley Bank snowballed after it disclosed a $1.8 billion loss on a sudden sale of $21 billion worth of high-quality, rate-sensitive mortgage and Treasury securities. It was the biggest U.S. bank failure since Washington Mutual’s collapse in 2008.

The FDIC estimated that U.S. banks had some $620 billion of unrealized losses from securities on their books as of the end of 2022, including longer-duration Treasurys and mortgage securities that have become worth less than their face value.

“Unrealized losses on securities have meaningfully reduced the reported equity capital of the banking industry,” FDIC Chairman Martin Gruenberg said on March 6, in a speech at the Institute of International Bankers.

Days after that gathering, Silicon Valley Bank and Signature Bank both collapsed, prompting regulators to roll out a new emergency bank funding program to help head off any liquidity strains at other U.S. lenders. Regulators also backstopped all deposits at the two failed lenders.

Bair earlier this month argued that if U.S. banking authorities see systemic risks they should go to Congress and ask for a backstop against uninsured deposits, beyond the standard $250,000 cap per depositor, at a single bank. Specifically, she wants zero-interest accounts, or those used for payroll and other operational expenses, to be fully covered, as was the case for a few years in the wake of the global financial crisis to stop runs on community banks.

Treasury Secretary Janet Yellen said Wednesday that blanket deposit insurance protection isn’t something her department is considering, but added that the appropriate level of protection could be debated in the future.

Fed Chairman Jerome Powell on Wednesday said the U.S. banking system “is sound and resilient, with strong capital and liquidity,” after hiking rates by another 25 basis points to a range of 4.75% to 5%, up from almost zero a year ago.

See: Fed hikes interest rates again, pencils in just one more rate rise this year

Bair has been calling for a pause on Fed rate hikes since December. She said that instead of raising rates by another 25 basis points on Wednesday, Fed Chair Powell should have hit pause and said the central bank needs time to assess.

“If we have a financial crisis, we won’t have a soft landing,” Bair said. “We have to avoid that at all costs.”

Read: Bank failures like SVB are a reminder that ‘risk-free’ assets can still wreck portfolios

Stocks closed modestly higher Thursday in choppy trade, with the Dow Jones Industrial Average
DJIA,
+0.23%
up 0.2% and S&P 500 index
SPX,
+0.30%
advancing 0.3%, while the Nasdaq Composite Index
COMP,
+1.01%
gained 1%.

Source link

March 23, 2023
Moody’s sees risk that U.S. banking ‘turmoil’ can’t be contained

Despite quick action by regulators and policy makers, there’s a rising risk that banking-system stress will spill over into other sectors and the U.S. economy, “unleashing greater financial and economic damage than we anticipated,” said Moody’s Investors Service, one of the Big Three credit-ratings firms.

Simply put, the risk is that officials “will be unable to curtail the current turmoil without longer-lasting and potentially severe repercussions within and beyond the banking sector,” Atsi Sheth, Moody’s managing director of credit strategy, and others wrote in a note distributed on Thursday. Still, the agency’s baseline view is that U.S. officials will “broadly succeed.”

Moody’s warning came as Treasury Secretary Janet Yellen indicated that the U.S. could take additional actions if needed to stabilize the banking system, and after Federal Reserve Chairman Jerome Powell assured Americans on Wednesday that the central bank would use its tools to protect depositors.

Read: Regional banks get the attention, but worries are more widespread, says ex-FDIC chief Bair and Debate over expanding deposit insurance weighs on bank stocks. Here’s what to know.

Beneath the surface, though, is lingering worry. Hedge-fund manager Bill Ackman, for example, is warning of an acceleration of deposit outflows from banks and the latest global fund manager survey from Bank of America
BAC,
-2.42%
found that 31% of 212 managers polled regard a systemic credit crunch as the biggest threat to markets.

Of the three ways in which banking-system troubles could spill over more broadly, one of them is potentially the “most potent,” according to Moody’s: That is a general aversion to risk by financial-market players and a decision by banks to retrench from providing credit. Such a scenario could lead to the “crystallization of risk in multiple pockets simultaneously,” the ratings agency said.

Source: Moody’s Investors Service

“Over the course of 2023, as financial conditions remain tight and growth slows, a range of sectors and entities with existing credit challenges will face risks to their credit profiles,” the Moody’s team wrote. Banks are not the only type of players with exposure to interest-rate shocks, and “market scrutiny will focus on those entities that are exposed to similar risks as the troubled banks.”

A second potential channel for spillover is through the direct and indirect exposure to troubled banks that private and public entities have — via deposits, loans, transactional facilities, essential services, or holdings in those banks’ bonds and stocks. And a third way in which banking problems could spread more broadly is through a misstep by policy makers, who have been focused on inflation and may not be able to respond effectively enough to evolving developments, Moody’s said.

On Thursday, U.S. stocks
DJIA,
+0.23%

SPX,
+0.30%

COMP,
+1.01%
finished higher as investors continued to weigh the risks to the banking sector. The policy-sensitive 2-year Treasury yield
TMUBMUSD02Y,
3.833%
fell to its lowest level this year, while gold futures settled at a more than one-year high.

Last week, Fitch Ratings said that nonbank financial institutions, insurers, and funds were experiencing a variety of “knock-on effects” as the result of the sudden deterioration of a few U.S. banks.

Source link

March 23, 2023
Brussels to Berlin: We’ll find a way to save the car engine

Press play to listen to this article

Voiced by artificial intelligence.

On the future of the internal combustion engine, Germany has gotten its own way, again.

The European Commission and Germany’s Transport Ministry announced a deal Saturday morning that commits the EU executive to figuring out a legal way to allow the sale of new engine-installed cars running exclusively on synthetic e-fuels even after a mandate comes into force requiring sales of only zero-emission vehicles from 2035.

“We have found an agreement with Germany on the future use of e-fuels in cars,” the Commission’s Green Deal chief Frans Timmermans said on Twitter. “We will work now on getting the CO2 standards for cars regulation adopted as soon as possible.”

The deal heads off a row over car legislation that was all-but-agreed until Germany, along with a small club of allies, slammed on the brakes just days before formal final approval on a law that is the centerpiece of the EU’s green agenda.

Timmermans said the Commission would “follow up swiftly” with “legal steps” to turn a non-binding annex to the law, introduced originally at the insistence of Europe’s car-making titan Germany, into a concrete workaround allowing new vehicles running on e-fuels, which do emit some CO2, to be sold post-2035.

As a first step, the Commission has agreed to carve out a new category of e-fuel-only vehicles inside the existing Euro 6 automotive rulebook and then integrate that classification into the contentious CO2 standards legislation that mandates the 2035 phase-out date for sales of new combustion-engine vehicles.

The terms of the final deal from Timmermans’ cabinet chief Diederik Samsom, seen by POLITICO, say the Commission will reopen the text of the engine-ban law if EU lawmakers manage to stop the introduction of a technical annex that would make space for e-fuels alongside the agreed CO2 standards. Reopening the proposed law’s text is a move that is fundamentally opposed by the European Parliament and green-minded countries.

The crux of the standoff was that Germany demanded binding legal language that would ensure the Commission would find a way to satisfy Berlin’s demands even if the European Parliament, or the courts, moved to block any tweaks or legal annexes to the 2035 zero-emissions legislation covering cars and vans.

In the statement, Samsom promised the Commission will publish its full e-fuels proposal as a so-called delegated act this fall. In practice, that means the original 2035 legislation will pass at first — offering the European Commission a critical win — but it sets up a future fight over the technical additions needed to satisfy Berlin.

“The law that 100 percent of cars sold after 2035 must be zero emissions will be voted unchanged by next Tuesday,” said Pascal Canfin, the French liberal lawmaker spearheading the file in the assembly. “Parliament will decide in due course on the Commission’s future proposals on e-fuels.”

Engine endgame

The deal means energy ministers can sign off on the original 2035 proposal during a meeting on Tuesday given that Berlin now has assurances that its demands will be met. In advance, EU ambassadors will review the bilateral deal between Brussels and Berlin on Monday, an EU diplomat said.

The agreement caps a decade of German pushback on EU automotive emissions rule-making.

In 2013, then-Chancellor Angela Merkel intervened late to water down previous iterations of car emission standards legislation, securing tweaks critical to the country’s hulking automotive industry.

The deal means Germany has effectively dropped its last-minute opposition to the car engine ban law | Sean Gallup/Getty Images

Since the Volkswagen Dieselgate scandal, most carmakers have shifted their investments toward electric vehicles, but some industry interests, notably high-end carmakers such as Porsche and Germany’s web of combustion engine component makers, have sought to save traditional gas guzzlers from the clutches of a de facto EU sales ban.

Figuring out a final workaround on e-fuels in the 2035 legislation will still take some months, given that technical standards haven’t yet been clarified for setting out a “robust and evasion-proof” system for selling cars that can only be fuelled on synthetic alternatives to petrol and diesel, according to Samsom’s statement.

The timeline is already clear in Berlin’s perspective. “We want the process to be completed by autumn 2024,” said the German Transport Ministry, which is run by the country’s Free Democratic Party. The FDP, the most junior in Germany’s three-way governing coalition, had wanted fixed legal language to guarantee a loophole for e-fuels, which can theoretically be CO2-neutral but which wouldn’t normally comply with the emissions legislation since they do still emit tailpipe pollutants.

With the FDP’s popularity tumbling, the car policy row with Brussels has been a popular talking point in German media over recent weeks. One survey reports that 67 percent of respondents are against the engine ban legislation. Ahead of national elections in late 2025, the FDP is betting on driver-friendly policies such as e-fuels, new road construction initiatives and a block on the implementation of a national highway speed limit, to raise its profile.

Market watchers don’t anticipate e-fuels to offer much in the way of a mass-market alternative to electric vehicles, given that they are costly to produce and don’t exist in commercial volumes today. A study by the Potsdam Institute for Climate Research reports that even if all global e-fuel production was allocated to German consumers, the output would only meet a tenth of national demand in the aviation, maritime and chemical sectors by 2035.

“E-fuels are an expensive and massively inefficient diversion from the transformation to electric facing Europe’s carmakers,” said Julia Poliscanova from the green group Transport & Environment.

Auto politics

Despite not being on the formal agenda, the issue dominated discussions on the sidelines of this week’s summit of EU leaders in Brussels. A deal between Brussels and Berlin was only struck at 9 p.m. on Friday, hours after leaders left the EU capital, before being formally announced on social media early Saturday.

“The way is clear,” said German Transport Minister Volker Wissing in announcing the agreement. “We have secured opportunities for Europe by keeping important options open for climate-neutral and affordable mobility.”

The deal means Germany has effectively dropped its last-minute opposition to the car engine ban law, collapsing a blocking minority of Italy, Poland, Bulgaria and the Czech Republic that had put a roadblock in front of final ratification by ministers of the deal reached last October between the three EU institutions.

It remains unclear whether Italy’s attempts to find a separate workaround for biofuels — promoted personally by Prime Minister Giorgia Meloni at the summit — also succeeded. However, without Berlin’s support, Rome doesn’t have a way to block the legislation.

German Transport Minister Volker Wissing | Maja Hitij/Getty Images

Responses to the Commission working up a bespoke fix for its biggest member country on otherwise agreed legislation were generally negative, with many arguing the e-fuels issue is a diversion.

“The opening for e-fuels does not mean a significant change for the transformation to electric cars,” said Ferdinand Dudenhöffer, a professor at the Center for Automotive Research in Duisburg. He said the Commission’s dealmaking raised “new investment uncertainties” that undermined the bloc’s efforts to catch up with China, the world’s leading producer of electric vehicles.

Still, most are just happy that the combustion engine row is ended, for now.

“It is good that this impasse is over,” said German Environment Minister Steffi Lemke, who backed the original 2035 deal without a reference to e-fuels. “Anything else would have severely damaged both confidence in European procedures and in Germany’s reliability inside European politics,” the minister said in a statement.

Joshua Posaner

Source link

March 23, 2023
Coinbase stock sinks 16% after crypto exchange discloses SEC warning

Shares of Coinbase Global Inc. dropped 15.8% in the extended session Wednesday after the crypto exchange disclosed a warning from regulators that it may have broken securities laws.

Coinbase
COIN,
-8.16%
said it received a Wells notice from the Securities and Exchange Commission, which could lead to formal charges.

“We asked the SEC for reasonable crypto rules for Americans. We got legal threats instead,” Coinbase said in a blog post detailing the action. “Rest assured, Coinbase products and services continue to operate as usual — today’s news does not require any changes to our current products or services.”

Based on discussions with the SEC, Coinbase said that the potential charges relate to the company’s spot market, its staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet.

The crypto exchange said it asked the regulators to detail which assets in its platforms the SEC believes may be securities, but the SEC declined to do so. Coinbase called it a “cursory investigation.”

SEC representatives declined to comment Wednesday.

The company said that the investigation is “still at a very early stage,” and that it has turned in documents and provided two witnesses for testimony, “one on the basic aspects of our staking services and one on the basic operation of our trading platform.”

Coinbase has said that its staking services are not securities.

Regulators have doubled down on efforts to increase oversight of the crypto industry, shutting down crypto exchange Kraken’s staking program in February and issuing a Wells notice to warn stablecoin issuer Paxos.

Staking allows users to earn rewards by using their existing holdings of tokens to verify transactions.

Shares of Coinbase ended the regular trading day down 8.2%.

Source link

March 22, 2023
SEC charges Tron founder Justin Sun with fraud, Lindsay Lohan with illegally touting crypto securities

The nation’s top security regulator announced charges against Justin Sun, founder of the crypto platform Tron, alleging that he sold unregistered crypto securities and fraudulently manipulated the secondary market for Tronix
TRXUSD,
+4.54%,
the platform’s native token.

The Securities and Exchange Commission unveiled the charges against Sun and eight celebrities whom it alleges illegally touted Tronix and another token BitTorrent, including actress Lindsay Lohan, social media personality Jake Paul, porn star Kendra Lust, and musicians Lil Yachty, Austin Mahone, Soulja Boy, Ne-Yo and Akon.

With the exception of Soulja Boy and Mahone, the six other celebrities settled with the SEC, agreeing to pay a total of $400,000 in disgorgement, interest and penalties, without admitting or denying the regulator’s findings.

The SEC’s complaint alleges Sun orchestrated a plan to sell Tronix tokens and another crypto security BitTorrent
BTTUSD,

without registering with the SEC and directing his company’s employees to conduct wash trades in these securities to “create the artificial appearance of legitimate investor interest and keep TRX’s price afloat.”

“This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure,” said SEC Chairman Gary Gensler, in a statement, adding that Sun “generated millions in illegal proceeds at the expense of investors.”

Sun, a Chinese national who received a graduate degree from the University of Pennsylvania and, according to the SEC, is believed to be living in Singapore or Hong Kong. He currently serves as the Permanent Representative of Grenada to the World Trade Organization.

The SEC alleges that he misrepresented the truth about about the celebrity touting campaign, saying that celebrities that promote TRON were required to disclose that fact, their social media posts did not in fact disclose these payments.

Sun began promoting the Tron ecosystem in 2017, with the publication of a white paper that advertised the purported advantages of Tron relative to the bitcoin
BTCUSD,
+1.26%
and ethereum
ETHUSD,
+1.15%
blockchains.

In 2018, Sun acquired BitTorrent Inc., a peer-to-peer file sharing protocol and incorporated it into the Tron blockchain ecosystem, with the goal of building a decentralized content distribution platform.

Sun made headlines in 2019 when he bid $4.5 million at a charity auction to have lunch with billionaire cryptocurrency skeptic Warren Buffett, which he then postponed. The dinner ultimately took place in January of 2020, with the proceeds going to benefit the San-Francisco based Glide Foundation.

Source link

March 22, 2023
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

Source link

March 22, 2023

As Biden talks about ‘back-to-back’ terms, here are the potential 2024 Republican candidates

The contest to become the Republican Party’s 2024 presidential nominee is heating up, with Nikki Haley, a former U.S. ambassador to the UN, and long-shot candidate Vivek Ramaswamy each announcing their runs last month.

Another notable move is the rollout of a book by Florida Gov. Ron DeSantis, in which he argues that his approach to managing his state can provide a model for the rest of the country.

And former President Donald Trump headlined the latest Conservative Political Action Conference, after announcing back in November that he’s running again. His remarks came after Haley and Ramaswamy gave their own CPAC speeches.

Plus, former Maryland Gov. Larry Hogan has said he won’t seek his party’s nomination.

So who are all the GOP politicians in the mix for 2024?

Below is MarketWatch’s list of the potential Republican presidential contenders and the status of their candidacies.

Meanwhile, President Joe Biden appears poised to announce this spring that he’ll seek re-election in 2024. Democrats seem to be closing ranks behind Biden, although author and activist Marianne Williamson said she’s seeking the party’s nomination again.

Biden made a joke Tuesday about re-election at a White House event at which he presented medals to authors, singers and other honorees. He noted that novelist Colson Whitehead had won back-to-back Pulitzer Prizes.

“I’m kind of looking for a back-to-back myself,” the president said.

And see: 5 things to know about Nikki Haley, the Republican candidate challenging Trump in 2024

Plus: Ron DeSantis skips CPAC, says Republicans act like ‘potted plants’ when facing ‘woke ideology’

Name	Title	Reports or statements on candidacy
Greg Abbott	Texas governor	Abbott strategist said governor “will take a look at the situation” after state’s legislative session ends in late May
John Bolton	Former national security adviser, former ambassador to UN	He has said he may run for president in 2024
Liz Cheney	Former Wyo. congresswoman	She has said she hasn’t made a decision about a 2024 run
Chris Christie	Former N.J. governor	He has said he’s considering running
Ted Cruz	U.S. senator for Texas	He said he won’t seek the GOP presidential nomination, instead aiming for re-election in Senate
Aaron Day	Known in part for running against former N.H. GOP Sen. Kelly Ayotte	He announced his candidacy in February
Ron DeSantis	Florida governor	He hasn’t made a formal announcement, but his team has rolled out a book and talked to prospective campaign staff
Nikki Haley	Former ambassador to UN, former S.C. governor	She announced her run in February
Larry Hogan	Former Md. governor	He said he won’t run
Asa Hutchinson	Former Ark. governor	He has said he plans to make a decision in April
Perry Johnson	Businessman and former Mich. gubernatorial candidate	He announced his candidacy in early March
Brian Kemp	Ga. governor	He hasn’t ruled out running, but has said he’s “not focused on 2024“
Steve Laffey	Former Cranston, R.I., mayor	He announced his candidacy in February
Kristi Noem	S.D. governor	She has said she hasn’t ruled out a presidential run
Mike Pence	Former vice president	He has beefed up his staff but said he doesn’t feel any rush to make an announcement
Mike Pompeo	Former secretary of state	He has said he’s still deciding whether to run
Vivek Ramaswamy	Entrepreneur and author known for criticizing ESG investing, “wokeism”	He announced his candidacy in February
Kim Reynolds	Iowa governor	A former RNC chair has said she should be considered for 2024
Tim Scott	U.S. senator for S.C.	He has delivered speeches in Iowa, a key primary state
Francis Suarez	Mayor of Miami, Fla.	He has said he’s considering a run
Chris Sununu	N.H. governor	He has said he’s considering a run
Donald Trump	Former president	He announced in November that he’s running
Glenn Youngkin	Va. governor	He hasn’t ruled out running, but said he’s focused on Virginia

Source link

March 22, 2023

First Republic stock rockets toward record gain, but recovers less than half of Monday’s plunge

Shares of First Republic Bank
FRC,
+42.71%
rocketed 43.7% on heavy volume, putting them on track for a record one-day gain, as Treasury Secretary Janet Yellen said the U.S. government was committed to keeping the banking system safe, and amid reports JPMorgan Chase & Co.
JPM,
+2.95%
was working to help the bank. The previous record rally was 27.0% on March 14, 2023. Trading volume ballooned to 87.8 million shares, already nearly triple the full-day average, and enough to make stock the the most actively traded on major U.S. exchanges. Meanwhile, the stock’s price gain of $5.33 means it has only recovered about 49% of Monday’s $10.85, or 47.1% selloff, that took the stock to a record-low close of $12.18. The stock has plummeted 85.6% year to date, while the SPDR S&P Regional Banking exchange-traded fund
KRE,
+5.48%
has tumbled 22.2% and the S&P 500
SPX,
+0.73%
has gained 3.7%.

Source link

March 21, 2023
What are CoCos and why are Credit Suisse’s now worth zero?

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.

Source link

March 20, 2023
The Fed will either pause or hike interest rates by 25 basis points. What are the pros and cons of each approach?

The Federal Reserve will meet on Wednesday and, for once, the outcome is unclear.

This is the most uncertain Fed meeting since 2008, said Jim Bianco, president of Bianco Research.

Fed officials, starting with former chair Ben Bernanke, have perfected the art of having the market price in what the central bank will do — at least regarding interest rates — at each upcoming meeting. That has happened 100% of the time, Bianco said on Twitter.

The Fed’s meeting this week is different because it follows the sudden collapse of confidence in the U.S. banking system following the government takeover of Silicon Valley Bank as well as the tremors around the world that have led to the shotgun wedding of Swiss banking giant Credit Suisse and its longtime rival, UBS.

At the moment, the market probabilities are 73% for a quarter-percentage-point move and 27% for no move, according to the CME FedWatch tool. The market seems to be growing in confidence of a hike, analysts said, based on movements on the front end of the curve.

The Fed’s decision will come on Wednesday at 2 p.m. Eastern and will be followed by a press conference from Fed Chair Jerome Powell.

“Depending on your perspective, the Fed’s decision will be seen as either capitulation to the markets or ivory-tower isolation from the markets,” said Ian Katz, a financial sector analyst with Capital Alpha Partners.

Here are the pros and cons for both a pause and a 25-basis-point hike.

The case for and against a pause

The main rationale for a pause is that the banking system is under stress.

“While policymakers have responded aggressively to shore up the financial system, markets appear to be less than fully convinced that efforts to support small and midsize banks will prove sufficient. We think Fed officials will therefore share our view that stress in the banking system remains the most immediate concern for now,” said Jan Hatzius, chief economist at Goldman Sachs, in a note to clients Monday morning.

Former New York Fed President William Dudley said he would recommend a pause. “The case for zero is ‘do no harm,’” he said.

The case against a pause is that it could spark more worries about the banking system.

“I think if they pause, they are going to have to explain exactly what they are seeing, what is giving them more concern. I am not sure a pause is comforting,” said former Fed Vice Chair Roger Ferguson in a television interview on Monday

The case for and against a 25-basis-point hike

The main reason for a quarter-percentage-point rate increase, to a range of 4.75%-5%, is that it could project confidence.

“What you need from policymakers is steady hands, steady ship,” said Max Kettner, chief multi-asset strategist at HSBC. “You don’t need overaction … flip-flopping around in projections or opinions.”

The Fed should say that it has managed to contain confidence so far and that “we can press ahead with the inflation fight,” he added.

Oren Klachkin, lead U.S. economist at Oxford Economics, said he didn’t think “the recent bank failures pose systemic risks to the broad financial system and economy.”

He noted that “inflation is still running hot” and the Fed has better ways to alleviate banking-sector stress than interest rates.

The case against hiking is that doing so could further exacerbate concerns about the stability of the banking sector.

“A rate hike now might have to be quickly reversed to deal with a deeper, less contained recession and disinflation. Why would the Fed raise rates when it may be forced to cut rates so much sooner than previously hoped?” asked Diane Swonk, chief economist at KPMG.

Gregory Daco, chief economist at EY, said he thinks economic activity is slowing, which gives the Fed time.

“There is no rush to hike. We are not going to see hyperinflation as a result,” he said.

Stocks
DJIA,
+1.20%

SPX,
+0.89%
rose Monday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.485%
inched up to 3.46%, still well below the 4% level seen prior to the banking crisis.

Source link

March 20, 2023
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.

Source link

March 19, 2023
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.

Source link

March 19, 2023
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%

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.

Source link

March 19, 2023
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.

Source link

March 19, 2023
Putin arrest warrant issued by International Criminal Court in the Hague

THE HAGUE (AP) — The International Criminal Court said Friday it has issued an arrest warrant for Russian President Vladimir Putin for war crimes because of his alleged involvement in abductions of children from Ukraine.

News Pulse: Ahead of Xi’s trip to Moscow, Biden White House calls on Chinese leader to talk with Ukraine President Zelensky

The court said in a statement that Putin “is allegedly responsible for the war crime of unlawful deportation of population (children) and that of unlawful transfer of population (children) from occupied areas of Ukraine to the Russian Federation.”

It also issued a warrant Friday for the arrest of Maria Alekseyevna Lvova-Belova, the Commissioner for Children’s Rights in the Office of the President of the Russian Federation, on similar allegations.

The court’s president, Piotr Hofmanski, said in a video statement that while the ICC’s judges have issued the warrants, it will be up to the international community to enforce them. The court has no police force of its own to enforce warrants.

“The ICC is doing its part of work as a court of law. The judges issued arrest warrants. The execution depends on international cooperation.”

A possible trial of any Russians at the ICC remains a long way off, as Moscow does recognize the court’s jurisdiction — a position reaffirmed earlier this week by Kremlin spokesman Dmitry Peskov — and does not extradite its nationals.

Ukraine also is not a member of the court, but it has granted the ICC jurisdiction over its territory and ICC prosecutor Karim Khan has visited four times since opening an investigation a year ago.

The ICC said that its pretrial chamber found there were “reasonable grounds to believe that each suspect bears responsibility for the war crime of unlawful deportation of population and that of unlawful transfer of population from occupied areas of Ukraine to the Russian Federation, in prejudice of Ukrainian children.”

The court statement said that “there are reasonable grounds to believe that Mr Putin bears individual criminal responsibility” for the child abductions “for having committed the acts directly, jointly with others and/or through others [and] for his failure to exercise control properly over civilian and military subordinates who committed the acts.”

From the archives (February 2023): Russia has committed crimes against humanity in Ukraine, U.S. Vice President Harris says

On Thursday, a U.N.-backed inquiry cited Russian attacks against civilians in Ukraine, including systematic torture and killing in occupied regions, among potential issues that amount to war crimes and possibly crimes against humanity.

The sweeping investigation also found crimes committed against Ukrainians on Russian territory, including deported Ukrainian children who were prevented from reuniting with their families, a “filtration” system aimed at singling out Ukrainians for detention, and torture and inhumane detention conditions.

But on Friday, the ICC put the face of Putin on the child abduction allegations.

Read on:

Biden vows Russia will ‘never’ win war against Ukraine

Mike Pence characterizes fellow Republicans challenging ongoing U.S. assistance of Ukraine as ‘apologists for Putin’

Tucker Carlson questionnaire reveals a fault line among Republicans: U.S. support for Ukraine’s defense against Russian invasion

Source link

March 17, 2023
First Republic gets $30 billion in deposits from 11 major U.S. banks, but stock resumes slide as it suspends dividend

Bank of America BAC, Citigroup C, JPMorgan Chase JPM and Wells Fargo WFC said Thursday that they are each making $5 billion in uninsured deposits into First Republic Bank FRC as part of a $30 billion backstop by 11 banks against the ravaged banking landscape of the past week.

However, First Republic stock fell 14.7% in after-hours trading after the bank said it would suspend its dividend to conserve cash. The bank last paid a quarterly dividend of 27 cents a share on Feb. 9 to shareholders of record as of Jan. 26.

It…

Source link

March 16, 2023
3 keys to successful fintech-bank collaboration, CX | Bank Automation News

LONDON – Banks continue to grapple with idea of buy vs. build, but partnerships with fintechs allow the entities teach each other about innovation and customer experience. “Banks can learn from fintechs how to be agile, innovative and customer-focused, while we offer them a big installed base and learnings on how banking [and regulation] works,” […]

Neil Ainger

Source link

March 16, 2023

Tag: regulation

Engine endgame

Auto politics

The case for and against a pause

The case for and against a 25-basis-point hike

Over there?