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Credit Suisse news – latest: UBS shares suffer largest fall since 2008 after rescue deal

UBS shares have fallen by as much as 16 per cent in early trade, their biggest one-day fall since 2008.

It follows concerns among investors about the long-term benefits of the rescue deal for Credit Suisse and the outlook for banks in Switzerland.

In a package engineered by Swiss regulators on Sunday, UBS Group AG will pay 3 billion Swiss francs (£2.65bn) for Credit Suisse Group AG and assume up to 5 billion francs (£4.4bn) in losses.

Credit Suisse shares slumped 62 per cent, reflecting the huge loss its shareholders will see in their investment in the bank.

Meanwhile, the FTSE 100 was down 0.7 per cent as markets opened in London, after UBS agreed a rescue deal to buy its banking rival Credit Suisse in a $3.2bn takeover.

Asia markets were also mostly down on Monday morning, with Hong Kong’s Hang Seng index leading losses in the region – falling more than 2 per cent and dragged down by healthcare stocks, CNBC reported.

Key Points

  • UBS shares suffer largest fall since 2008 after Credit Suisse deal

  • European banks take early hit after Credit Suisse rescue deal agreed

  • FTSE 100 falls after Credit Suisse sold to UBS

  • How worried should we be about bank collapse contagion?

Wall Street eyes subdued open as bank worries persist

13:35 , Maryam Zakir-Hussain

Wall Street’s main indexes were set for a subdued open in volatile trading on Monday as investors weighed a state-backed takeover of Credit Suisse and the odds of the Federal Reserve keeping interest rates unchanged this week.

Traders have raised bets of the Fed likely hitting a pause on rate hikes on Wednesday to ensure financial stability as bank sector troubles triggered by the collapse of Silicon Valley Bank and Signature Bank threaten to snowball.

Over the weekend, UBS agreed to buy rival Credit Suisse for $3.23 billion, in a shotgun merger engineered by Swiss authorities to avoid more market-shaking turmoil in global banking.

U.S.-listed shares of Credit Suisse plummeted 57.9% in premarket and were set to open at a fresh record low, while those of UBS lost 3.5%, as focus shifted to the hit to some Credit Suisse bondholders from the acquisition.

“Market has been digesting the shotgun wedding between UBS and Credit Suisse. Systemic risks are a little bit more minimized (and) everyone is just looking forward to what the Fed is going to do,” said Matt Orton, chief market strategist at Raymond James Investment Management.

“The Fed really is between a rock and a hard place because it’s got to stay committed to monetary policy. It’s worked hard to regain its credibility and this banking issue really throws a wrench into it.”

Traders’ bets are now tilted towards a no-hike scenario, with 43% expecting the Fed to raise rates by 25 basis points.

Investors also await economic data including existing home sales, weekly jobless claims and durable goods this week to gauge the strength of the U.S. economy.

U.S. stock futures reversed course to rise marginally in choppy trading. At 8:24 a.m. ET, Dow e-minis were up 9 points, or 0.03%, S&P 500 e-minis were up 0.75 points, or 0.02%, and Nasdaq 100 e-minis were up 1.75 points, or 0.01%.

Top central banks also moved on Sunday to bolster the flow of cash around the world, with the Fed offering daily currency swaps to ensure banks in Canada, Britain, Japan, Switzerland and the eurozone would have the dollars needed to operate.

Big U.S. banks such as JPMorgan Chase & Co, Citigroup and Morgan Stanley seesawed between losses and gains.

Regional bank First Republic Bank slid 19.2%, following a downgrade by S&P Global and a report of more fundraising that fanned worries about the bank’s liquidity despite a $30-billion rescue last week.

PacWest Bancorp was among the rare bright spots, jumping 19.7%, after the bank said deposit outflows had stabilized and its available cash exceeded total uninsured deposits.

The S&P Banking index and the KBW Regional Banking index on Friday logged their largest two-week drop since March 2020.

Among other stocks, Bed Bath & Beyond dropped 14.2% after seeking shareholder approval for a reverse stock split.

Giant bank deal triggers political backlash in Switzerland

13:07 , Maryam Zakir-Hussain

Switzerland’s two biggest political parties sharply criticized UBS’s takeover of Credit Suisse saying multi-billion state support for the deal created enormous risks for the country.

Swiss authorities announced on Sunday that UBS had agreed to buy rival Swiss bank Credit Suisse in a shotgun merger aimed at containing a crisis of confidence that was spreading through global banking.

Parties across the political spectrum raised concerns about the vast amounts of amounts of money provided through the liquidity injection from the central bank as well as government aid.

Credit Suisse and UBS could benefit from around 260 billion Swiss francs ($280 billion) in state and central bank support, a third of the country’s gross domestic product. The aid comes in the form of 250 billion in liquidity which will be repaid, while the government will absorb up to 9 billion in losses from the deal.

Roger Nordmann, leader of the Social Democrats (SP) in the Swiss lower house of parliament, warned that the support package amounted to an “enormous risk”.

“The new UBS is also another massive risk, it’s going to have more than 1,500 billion francs in assets, and it’s simply too big for Switzerland,” he told Reuters on Monday.

The Social Democrats are the second biggest party in the Swiss parliament and have two ministers in the country’s ruling cabinet.

The criticism ups pressure on the ruling cabinet, which rules by consensus, although it is unlikely to derail the deal.

Nordmann said he was also concerned about job losses, and blamed Credit Suisse‘s leadership for the bank’s failure.

“What has happened is terrible for the credibility of Switzerland,” he said. “It’s a warning shot for Switzerland about having banks which are just too big. I’m very concerned about the new UBS.”

Meanwhile the right-wing Swiss People’s Party (SVP) said it was worried about the billions now being deployed to make up for what it called the mistakes of Credit Suisse leadership and the “rip offs” by management.

In a memo seen by Reuters that was sent to staff on Sunday after the deal announcement, Credit Suisse reassured staff that their bonuses would be paid in full.

“Everything must be done to ensure ... the Swiss people are not harmed in the rescue,” said the party in a statement.

The party, the biggest in the Swiss parliament and which also has two members of the seven-strong cabinet, demanded clear conditions for the takeover.

“Otherwise UBS will become the next dangerous restructuring case,” the SVP said.

Credit Suisse: What does the takeover mean for UK banks and is your money safe?

12:41 , Maryam Zakir-Hussain

Banking shares in London have been hammered by the fears but Bank of England governor Andrew Bailey was quick on Sunday night to insist the financial system in the UK is “well capitalised and funded, and remains safe and sound”.

However, on Monday morning, FTSE 100 was down 0.7 per cent as markets opened in London.

Commenting on why investors may be apprehensive, Innes McFee, chief global economist at Oxford Economics, said: “UBS’ takeover of Credit Suisse, coming off the back of the failure of regional lenders in the US, has kept funding concerns elevated in markets. In particular, the decision to write down AT1 Bonds will make investors in that type of bank security think twice.”

Read more here:

Credit Suisse: What does the takeover mean for UK banks and is your money safe?

UK banks remain ‘safe and well-capitalised,’ Downing Street says

12:25 , Maryam Zakir-Hussain

Downing Street has said the UK banking system remains “safe and well-capitalised” following the takeover of the troubled Credit Suisse bank.

The prime minister’s official spokesman said that Rishi Sunak has been regularly updated on the situation by the Treasury and the Bank of England, and has been in touch with the Swiss president.

“Obviously it is good that a resolution has seen secured,” the spokesman said.

“As the Bank of England has said, we believe the UK banking system remains safe and well-capitalised.

“We have a strong regulatory system and we have taken a number of steps over the past 15 years, together with the Bank of England, to strengthen that system.”

Rishi Sunak speaks to Swiss president about Credit Suisse

12:16 , Maryam Zakir-Hussain

Rishi Sunak has spoken to the Swiss president about the Credit Suisse developments, according to the prime minister’s spokesperson.

Stay tuned for updates.

 (PA)
(PA)

Did SVB break the Fed? Part Two

11:38 , Maryam Zakir-Hussain

Economists and investors so far expect the Fed to proceed with another quarter point interest rate increase at its March 21-22 meeting, but only because inflation poses such a persistent risk policymakers won’t want to divert from efforts to control it.

The financial system, meanwhile, has been thrown extra support under a new Fed lending program for banks, while its traditional lender-of-last-resort cash window was tapped for a record $150 billion.

Fed officials gather this week having agreed bank stress poses a “systemic risk” to the economy, and “in any other hiking cycle this...would end the tightening process and perhaps send it into reverse,” said Ed Al-Hussainy, senior rates analyst at Columbia Threadneedle Investments. “The difference today is the Fed’s focus on inflation.”

In a recent Reuters poll 76 of 82 economists said they expect the Fed to approve a quarter point rate increase at this week’s meeting, lifting the target federal funds rate to a range between 4.75% and 5%. A similarly strong majority expect a further increase at a future Fed session.

The Fed’s policy statement will be released Wednesday at 2 p.m. (1800 GMT) along with closely watched projections from officials for the policy rate at year’s end, perhaps the best clue to how recent financial stress has reshaped the Fed’s outlook.

As of December officials expected the policy rate would rise to around 5.1% by year’s end.

 (PA Wire)
(PA Wire)

Did SVB break the Fed? Officials mull risks of more rate increases

11:05 , Maryam Zakir-Hussain

At an early January meeting of the Virginia Bankers Association, executives were already nervous that Federal Reserve interest rate increases were making it hard to compete for deposits.

“Everywhere I go in the industry people are feeling that kind of pressure,” the featured speaker of the day, Richmond Fed President Thomas Barkin, said in response to a question from the audience. The influence of Fed rate hikes “is going to hit...That is how it is designed.”

When Fed officials meet this week the suddenly urgent question is whether the level of pressure on the banking industry has become so great it risks a larger financial crisis - the sort of event associated with deep and hard-to-arrest economic downturns - and warrants a slowdown or pause to further rate increases.

The Fed and global central banks, after a tense 10 days with banks teetering in the U.S. and Europe, launched a second round of weekend efforts to buttress the system by expanding the Fed’s ability to ship dollars where needed. Separately a deal was struck for UBS to acquire the troubled Credit Suisse in a takeover reminiscent of the global financial crisis 15 years ago.

After the announcement Treasury Secretary Janet Yellen and Fed Chair Jerome Powell issued their second Sunday afternoon statement of reassurance in as many weeks, saying as Asian markets prepared to open for the week that “the capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient.”

The issue for Powell and his colleagues is whether the calming words and a bank lending new program are enough to stem broader problems and allow them to proceed with what has been their priority to now: Combating inflation with the ever-higher interest rates now bedeviling the banking system.

‘Banking panic’ has ‘gone global’, says analyst

10:27 , Andy Gregory

The “banking panic” is “not going away” and has instead “gone global”, an analyst has warned, as banking shares took a hit this morning, following the days of unease sparked by the collapse of Silicon Valley Bank and Credit Suisse rescue deal.

“It should be clear that after more than a week into the banking panic, and two interventions organised by the authorities, this problem is not going away. Quite the contrary, it has gone global,” said Mike O’Rourke, chief market strategist, Jones Trading.

UBS shares suffer largest fall since 2008 after Credit Suisse deal

10:02 , Andy Gregory

UBS shares fell by as much as 16 per cent in early trade, their biggest one-day fall since 2008, amid concerns among investors about the long-term benefits of the rescue deal for Credit Suisse and the outlook for banks in Switzerland.

In a package engineered by Swiss regulators on Sunday, UBS Group AG will pay 3 billion Swiss francs (£2.65bn) for Credit Suisse Group AG and assume up to 5 billion francs (£4.4bn) in losses.

Credit Suisse shares slumped 62 per cent, reflecting the huge loss its shareholders will see in their investment in the bank.

European banks take early hit after Credit Suisse rescue deal agreed

09:21 , Andy Gregory

There is some volatility in European bank shares this morning, following the rescue deal for Credit Suisse.

Some banks in the UK and Europe saw significant drops in value as they opened, with most having since recovered the losses of a further fall but still languishing below Friday’s closing prices.

Germany's Deutsche Bank and France's BNP Paribasare were both impacted this morning, while in the UK, Standard Chartered, HSBC and Barclays were among those affected, the BBC reported.

Markets weakness ‘reinforces concerns’ of spillover, says analyst

08:54 , Andy Gregory

Weakness in markets this morning “serves to reinforce concerns” of any “spillover effects on the rest of the banking sector”, an analyst has suggested.

“With Credit Suisse shareholders and some bondholders taking a huge hit, banks in Asia have taken a hit on similar concerns about [some of their] bond-holding values,” said Michael Hewson, chief market analyst at CMC Markets.

“While the weekend deal still presents the Swiss National Bank and Swiss Government with untold headaches, with the size of the newly merged bank set to dwarf the size of the Swiss economy.

“The phrase too big to fail really does spring to mind here, and this morning’s weakness in Asia markets serves to reinforce concerns about these types of writedowns and any spillover effects on the rest of the banking sector.”

FTSE 100 falls after Credit Suisse sold to UBS

08:23 , Andy Gregory

The FTSE 100 has fallen after struggling bank Credit Suisse was sold to Swiss rival UBS.

London’s top index opened trading on Monday sharply lower down 0.7 per cent, led by banks as expected. Meanwhile, the pound remains among the biggest winners against the dollar and trades just below $1.22.

Markets in Asia were struggling earlier in the morning, with shares in Hong Kong falling by more than 3 per cent as the banking sector took a battering.

My colleague Thomas Kingsley has more details:

FTSE 100 falls after Credit Suisse sold to UBS in emergency rescue deal

Swiss union ‘shocked’ after UBS takes over ailing Credit Suisse

07:30 , Sravasti Dasgupta

The Swiss Bank Employees Association has demanded that UBS keep job cuts to an “absolute minimum” amid reports of a merger with Credit Suisse, reported Reuters.

The employees’ body said it was “deeply shocked” after UBS’ government-backed offer to acquire its ailing rival.

“The jobs of very many employees are at stake,” it said, adding that it was in touch with management.

The statement underscores the sense of unease in Switzerland, with its reputation as a global financial centre on the line.

 (' KEYSTONE / MICHAEL BUHOLZER)
(' KEYSTONE / MICHAEL BUHOLZER)

Will the Bank of England hold its rates as US Federal Reserve faces a nasty dilemma?

07:00 , Sravasti Dasgupta

Which matters more: control of inflation or financial stability? The world’s central bankers now find themselves facing that vexing question, particularly those in the US where there are very real concerns about smaller banks after the collapse of Silicon Valley Bank (SVB) and a “flight to quality” among depositors.

James Moore writes:

Will the Bank of England hold rates as US Federal Reserve faces nasty dilemma?

How worried should we be about bank collapse contagion?

06:30 , Sravasti Dasgupta

“So, in rapid fashion, we’ve seen Silicon Valley Bank, Signature, Credit Suisse and First Republic all subjected to rescues and bailouts.

Compared to 2008, everyone involved is acting quicker and more decisively. There’s no room for delay – this is an emergency, we must stop this bank from going under and wiping out its customers. And we must prevent the toppling of other banks.”

Chris Blackhurst writes:

How worried should we be about bank collapse contagion?

What happened to Credit Suisse and why are banks needing bailouts again?

06:00 , Sravasti Dasgupta

Fears of another 2008-style banking crisis resurfaced this week after banking giant UBS swept in to buy its crisis-hit rival Credit Suisse and US authorities stepped in to broker a £24.7bn rescue package for First Republic.

Thomas Kingsley, Alastair Jamieson explain what happened to Credit Suisse and how worried we should be:

What happened to Credit Suisse and why are banks needing bailouts again?

Six central banks to boost flow of US dollars

05:30 , Sravasti Dasgupta

Six central banks have moved to boost the flow of US dollars to alleviate unease in global financial markets.

In a joint statement, the Bank of England, Bank of Japan, Bank of Canada, the European Central Bank, the US Federal Reserve and the Swiss National Bank said they had launched the co-ordinated action to “enhance the provision of liquidity”, reported the BBC.

The statement added that the move was an “important backstop to ease strains in global funding markets” and to lessen the impact on the supply of credit to households and businesses.

The arrangement, first adopted during the 2008 financial crisis and again during the Covid pandemic, will start on Monday and continue “at least through the end of April”, the Bank of England said.

The Bank of England will be under scrutiny on Thursday when it decides whether or not to push interest rates even higher (John Walton/PA) (PA Wire)
The Bank of England will be under scrutiny on Thursday when it decides whether or not to push interest rates even higher (John Walton/PA) (PA Wire)

UK banking system ‘safe and sound’ after Credit Suisse buyout, Bank of England says

05:00 , Sravasti Dasgupta

The Bank of England (BoE) has insisted Britain’s financial system is “safe and sound” in an effort to calm nerves as markets prepare to reopen in the wake of the emergency sale of Credit Suisse to UBS.

Read more:

UK banking system ‘safe and sound’ after Credit Suisse buyout, Bank of England says

UBS to buy crisis-hit rival bank Credit Suisse

04:30 , Sravasti Dasgupta

Banking giant UBS will buy its ailing rival Credit Suisse in a snap deal brokered by Swiss authorities to avoid further chaos in markets after a series of high-profile financial failures.

Read more:

UBS to buy crisis-hit bank Credit Suisse in bid to avoid financial chaos

Asia markets fall as UBS offers to buy Credit Suisse

03:54 , Sravasti Dasgupta

Asia markets were mostly down on Monday morning with Hong Kong’s Hang Seng index leading losses in the region, falling more than 2 per cent and dragged down by healthcare stocks, reported CNBC.

The Shanghai Composite was up 0.27 per cent, while the Shenzhen Component was 0.39 per cent higher.

Japan’s Nikkei 225 was 0.83 per cent down and the Topix was 0.9 per cent lower.

Meanwhile in South Korea, Kospi is 0.27 per cent lower while the Kosdaq was trading at 0.69 per cent higher.

FILE-A woman wearing a face mask looks at an electronic foreign currency exchange rates in downtown Seoul, South Korea (Copyright 2023 The Associated Press. All rights reserved)
FILE-A woman wearing a face mask looks at an electronic foreign currency exchange rates in downtown Seoul, South Korea (Copyright 2023 The Associated Press. All rights reserved)