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  • U.S. stocks end higher, S&P 500 books back-to-back weekly gains despite bank jitters spurred by Deutsche Bank

    U.S. stocks end higher, S&P 500 books back-to-back weekly gains despite bank jitters spurred by Deutsche Bank

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    U.S. stocks finished Friday higher, despite a jump in the cost of Deutsche Bank’s credit-default swaps helping to reignite banking-sector worries. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite each booked weekly gains.

    How stocks traded
    • The Dow Jones Industrial Average
      DJIA,
      +0.41%
      rose 132.28 points, or 0.4%, to close at 32,237.53.

    • The S&P 500
      SPX,
      +0.56%
      gained 22.27 points, or 0.6%, to finish at 3,970.99.

    • The Nasdaq Composite
      COMP,
      +0.31%
      added 36.56 points, or 0.3%, to end at 11,823.96.

    For the week, the Dow gained 1.2%, while the S&P 500 rose 1.4% and the Nasdaq advanced 1.7%, according to FactSet data. The Dow snapped two straight weeks of losses, while the S&P 500 and Nasdaq each booked back-to-back weekly gains.

    What drove markets

    U.S. stocks ended modestly higher Friday to notch weekly gains even as worries over the banking system lingered.

    Bank concerns have cast a “heavy cloud over the market,” with investors worried about “weak links,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management, in a phone interview Friday. Ma said he expects investors will be looking to sell, potentially into any rallies, “until some of these clouds are lifted.”

    Shares of Germany’s Deutsche Bank AG
    DBK,
    -8.53%

    DB,
    -3.11%
    dropped Friday, after the cost of insuring the bank against a credit default jumped. The bank’s credit-default swaps had risen to the highest level since late 2018, according to a Reuters report Friday.

    Treasury Secretary Janet Yellen announced Friday she called an unscheduled meeting of the Financial Stability Oversight Council or FSOC which was created in the wake of the 2008 financial crisis to help the government combat threats to financial stability. The FSOC issued a short statement after the market closed Friday saying that “while some institutions have come under stress, the U.S. banking system remains sound and resilient”.

    “Clearly, somebody thinks there are some concerns there,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab. The problems facing European banks stem back to the era of negative interest rates, which set banks up for large losses on their bond holdings, he said.

    The selloff in Deutsche Bank shares weighed on banks in the U.S. and Europe, as banking-sector fears reemerged. Shares of UBS Group
    UBS,
    -0.94%    ,
    which recently agreed to buy rival Credit Suisse Group, fell Friday.

    Other major European lenders, including Italy’s UniCredit S.p.A
    UCG,
    -4.06%
    and Spain’s Banco Santander SA
    SAN,
    -3.00%    ,
    also saw their shares sink.

    “The thing that’s important to know about financials is there probably are banks that have problems, but there are others that don’t,” Frederick told MarketWatch during a phone interview. “People need to do some research.”

    The S&P 500’s financial sector fell 0.1% Friday, according to FactSet data.

    While banking-sector woes have hammered the financial sector this month, the outperformance of megacap technology stocks and other sectors have helped prop up the broader U.S. equities market. So far this month, the S&P 500 index is up less than 0.1%, FactSet data show.

    Concerns about the fragility of the banking sector have been percolating following a year of the Federal Reserve’s aggressive interest rate hikes. On Wednesday, the Fed announced that it hiked its policy rate by a quarter point to a range of 4.75% to 5% while projecting it could deliver one more 25 basis-point hike in 2023.

    In his first comments since the rapid collapse of Silicon Valley Bank two weeks ago, St. Louis Federal Reserve President James Bullard said Friday the latest drop in Treasury yields could help cushion some of the stress facing the banking sector.

    Yields on the 2-year Treasury note
    TMUBMUSD02Y,
    3.779%
    and 10-year Treasury note
    TMUBMUSD10Y,
    3.376%
    each fell Friday in their third straight week of declines, according to Dow Jones Market Data. Two-year yields slid to 3.777% on Friday, the lowest level since September based on 3 p.m. Eastern time levels, while 10-year Treasury yields dropped to 3.379%, their lowest rate since January.

    Read: ‘Red alert recession signals.’ Gundlach expects the Fed to cut rates substantially ‘soon.’

    In U.S. economic data, a report Friday on sales of durable goods showed orders fell 1% in February, largely because of waning demand for passenger planes and new cars. Meanwhile, the S&P Global Flash U.S. services-sector index rose to an 11-month high of 53.8 in March.

    The role of regional banks in the U.S. economy is “huge,” said Sandi Bragar, chief client officer at wealth management firm Aspiriant, in a phone interview Friday. Bragar said she worries that recent regional bank failures will result in a pullback in lending that leads to slower economic growth and potentially a recession.

    “Our stance has been to be very diversified and we have been remaining on the defensive side of things,” she said.

    Within equities, that has meant holding “high-quality companies” that should be resilient in “poor economic times,” including stocks in areas such as healthcare, information technology and consumer staples, said Bragar.

    Companies in focus

    –Steve Goldstein contributed to this report.

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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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  • S&P 500 reclaims 4,000 mark, stocks end higher ahead of Fed rate decision

    S&P 500 reclaims 4,000 mark, stocks end higher ahead of Fed rate decision

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    The S&P 500 on Tuesday posted its highest close since the collapse of Silicon Valley Bank earlier this month, which sent shockwaves through financial markets and raised concerns about the stability of the U.S. banking system. The S&P 500 index
    SPX,
    +1.30%
    closed up about 51 points, or 1.3%, ending near 4,003, according to preliminary data from FactSet. That was its highest close since May 6, four days before the failure of Silicon Valley, the biggest bank collapse since the 2008 global financial crisis. The Dow Jones Industrial Average
    DJIA,
    +0.98%
    rose 1% Tuesday, while the Nasdaq Composite Index
    COMP,
    +1.58%
    swept to a 1.6% gain. Banks and companies with heavy exposure to rate-sensitive assets, including property loans, have been under pressure since Silicon Valley Bank’s implosion. It drew attention to some $600 billion in paper losses at banks from their holdings of “safe” but low-coupon securities that have fallen in value in the year since the Federal Reserve began rapidly increasing interest rates to combat high inflation. Those older bonds end up worth less when investors have access to new securities with higher yields, with a similar low-risk profile in terms of credit risks. The failure of several regional banks in March, plus the sale of Credit Suisse
    CS,
    +2.46%
    to rival bank UBS
    UBS,
    +11.97%
    over the weekend, has reawakened fears of potentially broader problems in the banking system as central bank have increased rates and ended an era of easy money. Even so, stocks were rallying as the Federal Reserve at the conclusion of its 2-day policy meeting on Wednesday is expected to raise its policy rate by another 25 basis points.

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

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  • UBS Erases Losses as Investors Weigh Credit Suisse Deal Impact | Bank Automation News

    UBS Erases Losses as Investors Weigh Credit Suisse Deal Impact | Bank Automation News

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    UBS Group AG erased losses while investors digested the drawbacks and potential upside of its Credit Suisse Group AG takeover, a deal that forces it to wind down assets and restructure while handing over valuable assets at a bargain price. The government-brokered, 3 billion Swiss franc ($3.2 billion) deal signed late Sunday was intended to […]

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  • UBS Stock Price | UBS Group AG Stock Quote (U.S.: NYSE) | MarketWatch

    UBS Stock Price | UBS Group AG Stock Quote (U.S.: NYSE) | MarketWatch

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    UBS Group AG is a holding company, which engages in the provision of financial management solutions. It operates through the following segments: Global Wealth Management, Personal and Corporate Banking, Asset Management, Investment Bank, and Group Functions. The Global Wealth Management segment advises and offers financial services to wealthy private clients except those served by Wealth Management Americas which include banking and lending, wealth planning, and investment management. The Personal and Corporate segment offers financial products and services to private, corporate, and institutional clients in Switzerland. The Asset Management segment consists of investment management products and services; platform solutions and advisory support to institutions; wholesale intermediaries, and wealth management clients. The Investment Bank segment comprises investment advice, financial solutions, and capital markets access among corporate, institutional, and wealth management clients. The Group Functions segment is involved in the group services which consist of Technology, Corporate Services, Human Resources, Finance, Legal, Risk Control, Compliance, Regulatory and Governance, Communications and Branding, and Group Sustainability and Impact. The company was founded on June 29, 1998 and is headquartered in Zurich, Switzerland.

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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, 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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  • 
		
		
    
			
    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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  • 
		
		
    
			
    Banking Giant UBS Acquiring Smaller Rival Credit Suisse To Avoid Market Turmoil
    
			
    Banking Giant UBS Acquiring Smaller Rival Credit Suisse To Avoid Market Turmoil
    
			
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    GENEVA, Switzerland (AP) — Banking giant UBS is buying its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced on Sunday night.
    

    

    

    Berset, who did not specify a value of the deal, called the announcement “one of great breadth for the stability of international finance. An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”
    

    

    

    The Swiss president said the council had agreed to guarantee a total of 150 billion francs of liquidity to the 167-year-old bank, well beyond the 50 billion (54 million Swiss francs) figure that had been announced publicly. But that didn’t appear to be enough.
    

    

    

    “We noted that the outflows of liquidity and the volatility of the markets demonstrated that necessary confidence could no longer be restored, and a rapid solution guaranteeing stability was essential.”
    

    

    

    Swiss Finance Minister Karin Keller-Sutter said the council “regrets that the bank, which was once a model institution in Switzerland and part of our strong location, was able to get into this situation at all.”
    

    

    

    The combination of the two biggest and best-known Swiss banks, each with storied histories dating back to the mid-19th century, amounts to a thunderclap for Switzerland’s reputation as a global financial center — leaving it on the cusp of having a single national champion in banking. Part of the woes faced by Credit Suisse in recent years involved a spying scandal ordered by its executives to snoop on a former colleague who moved to UBS.
    

    

    

    Berset said the Federal Council — Switzerland’s executive branch — had already been discussing a long-troubled situation at Credit Suisse since the beginning of the year, and held urgent meetings over the last four days amid spiraling concerns about its financial health that caused major swoons in its stock price and raised the specter of the 2007-2008 financial crisis.
    

    

    

    Credit Suisse is designated by the Financial Stability Board, an international body that monitors the global financial system, as one of the world’s globally systemic important banks. This means regulators believe its uncontrolled failure would lead to ripples throughout the financial system not unlike the collapse of Lehman Brothers 15 years ago.
    

    

    

    Sunday’s news conference follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent any further bank panics. Still, global financial markets have been on edge since Credit Suisse’s share price began plummeting this week.
    

    

    

    Many of Credit Suisse’s problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures led to a significant rescue effort by the Federal Deposit Insurance Corporation and the Federal Reserve. As a result, their downfall does not necessarily signal the start of a financial crisis similar to what occurred in 2008.
    

    

    

    The deal caps a highly volatile week for Credit Suisse, most notably on Wednesday when its shares plunged to a record low after its largest investor, the Saudi National Bank, said it wouldn’t invest any more money into the bank to avoid tripping regulations that would kick in if its stake rose about 10%.
    

    

    

    On Friday, shares dropped 8% to close at 1.86 francs ($2) on the Swiss exchange. The stock has seen a long downward slide: It traded at more than 80 francs in 2007.
    

    

    

    Its current troubles began after Credit Suisse reported on Tuesday that managers had identified “material weaknesses” in the bank’s internal controls on financial reporting as of the end of last year. That fanned fears that Credit Suisse would be the next domino to fall.
    

    

    

    While smaller than its Swiss rival UBS, Credit Suisse still wields considerable influence, with $1.4 trillion assets under management. The firm has significant trading desks around the world, caters to the rich and wealthy through its wealth management business, and is a major advisor for global companies in mergers and acquisitions. Notably, Credit Suisse did not need government assistance in 2008 during the financial crisis, while UBS did.
    

    

    

    Despite the banking turmoil, the European Central Bank on Thursday approved a large, half-percentage point increase in interest rates to try to curb stubbornly high inflation, saying Europe’s banking sector is “resilient,” with strong finances.
    

    

    

    ECB President Christine Lagarde said the banks “are in a completely different position from 2008” during the financial crisis, partly because of stricter government regulation.
    

    

    

    The Swiss bank has been pushing to raise money from investors and roll out a new strategy to overcome an array of troubles, including bad bets on hedge funds, repeated shake-ups of its top management and a spying scandal involving UBS.
    

    

    

    

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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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    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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    Transactions: American Express, Square partner on credit card | Bank Automation News
    
			
    Transactions: American Express, Square partner on credit card | Bank Automation News
    
			
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    American Express and digital payment platform Square are teaming up to launch a credit card for Square merchants on the AmEx network.  The expanded partnership will better support small businesses by organizing expenses and managing cash flow, according to a release.  “Our brands will offer a credit-card product specifically designed for Square sellers, backed by […]
    

    

    

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     Brian Stone
    

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