[ad_1]
- Credit Suisse is undertaking a major strategic overhaul aimed at restoring stability and profitability after a string of losses and scandals, but markets and stakeholders still appear unconvinced. is.
- The Financial Times reported Friday that UBS is in talks to buy all or part of Credit Suisse, citing people involved in the discussions.
- The CEO of Ethos, who represents shareholders who own more than 3% of Credit Suisse shares, told CNBC that it “hopes to continue the spin-off and independent listing of the Swiss division of CS.”
People walk in front of Credit Suisse headquarters in New York City on March 15, 2023.
Spencer Pratt | Getty Images
Credit Suisse may have received a liquidity lifeline from the Swiss National Bank, but analysts weigh the options for the sale and whether it’s actually “too big to fail,” struggling lenders prognosis is still being evaluated.
Credit Suisse management has started talks this weekend to assess its “strategic scenario,” Reuters reported, citing sources.
After the Financial Times reported on Friday that UBS was in talks to buy all or part of Credit Suisse, it cited multiple people involved in the discussions. You did not comment on this report.
The Swiss National Bank and its regulator, Finma, are behind negotiations aimed at boosting confidence in the Swiss banking sector, according to the FT. The bank’s U.S.-listed shares rose about 7% in after-hours trading on Saturday.
Credit Suisse is undertaking a major strategic overhaul aimed at restoring stability and profitability after a string of losses and scandals, but markets and stakeholders still appear unconvinced. is.
Stocks fell again on Friday, recording their worst weekly drop since the start of the coronavirus pandemic, after Credit Suisse said it would access up to 50 billion Swiss francs ($54 billion) in loans from Switzerland. It failed to sustain Thursday’s gains. Central Bank.
Credit Suisse lost about 38% of its deposits in the fourth quarter of 2022 and revealed in its belated annual report earlier this week that the outflow has yet to recover. A full-year net loss of CHF 7.3 billion was reported for 2022, with a further “significant” loss expected in 2023 and a return to profitability next year as restructuring begins to bear fruit.
This week’s stream of news is unlikely to have changed the minds of depositors looking to withdraw their money.
Meanwhile, credit default swaps, which insure creditors against corporate defaults, hit record highs this week. Bank default risk has surged to crisis levels, with the one-year CDS rate rising nearly 33% to 38.4% on Wednesday and closing at 34.2% on Thursday, according to CDS rates.
UBS sale?
There have long been rumors that some or all of Credit Suisse could be acquired by domestic rival UBS.
JPMorgan’s Kian Abouhossein said the acquisition was “a particularly likely scenario by UBS.”
In a memo on Thursday, he said a sale to UBS would likely result in: Closure of investment banks. Maintenance of property management departments and property management departments.
Both banks are reportedly against the idea of a forced partnership, but events this week may have changed that.
Vincent Kaufmann, CEO of Ethos, a foundation representing shareholders who own more than 3% of Credit Suisse shares, told CNBC that he wanted the Swiss division of CS to be spun off and listed independently. Told.
“A merger would not only pose a very high systemic risk for Switzerland, but would also create a dangerous monopoly for the Swiss public,” he added.
Meanwhile, Bank of America strategists said on Thursday that Swiss authorities may prefer Credit Suisse’s integration with its main domestic bank and smaller regional partners.
Need for an “orderly solution”
Banks are under pressure to reach an “orderly” solution to the crisis, whether through a sale to UBS or another option.
Barry Norris, CEO of Argonaut Capital, which holds a short position in Credit Suisse, stressed the importance of smooth results.
“The bank as a whole is essentially contracting, and whether that contraction will be orderly or chaotic is a debate at the moment, and neither will create value for shareholders,” he told CNBC on Friday. Squawk Box Europe.”
European bank stocks suffered a sharp decline over the recent Credit Suisse story, highlighting market concerns over contagion effects given the sheer size of the 167-year-old financial institution.
The sector was rocked earlier in the week by the failure of the Silicon Valley Bank, the biggest bank failure since Lehman Brothers, and the closure of a New York-based signatory bank.
However, in terms of size and potential impact on the global economy, these companies are worth about CHF 530 billion at the end of 2022, compared to Credit Suisse, which has a balance sheet roughly twice as large as Lehman Brothers at the time of its bankruptcy. It pales in comparison to Also, interconnection with multiple international subsidiaries is much more global.
“In Europe, I think the battlefield is Credit Suisse, but if Credit Suisse has to chaotically dissolve its balance sheet, those problems will extend beyond other European financial institutions and the banking sector. In particular, I think, “commercial real estate and private equity also look vulnerable to what’s happening in the financial markets right now,” Norris warned.
Andrew Kenningham, chief European economist at Capital Economics, also stressed the importance of an “orderly solution.”
“We have resolution plans as Global Systemically Important Banks (GSIBs), but these plans (or living wills) have not been tested since they were introduced during the global financial crisis,” Kenningham said. rice field.
“Experience so far suggests that if authorities act decisively and debtors are protected, they can be resolved quickly without spreading the infection.”
Regulators are aware of this, but until a long-term solution to the banking problem becomes clear, as evidenced by the intervention of the SNB and Swiss regulator FINMA on Wednesday, the “failed The risk of “settlement” will worry the market.
Central bank providing liquidity
The biggest question economists and traders are grappling with is whether the Credit Suisse situation poses systemic risk to the global banking system.
Oxford Economics said in a report on Friday that it did not include the financial crisis in its base case. At the moment, I see the Credit Suisse and his SVB issues as “a collection of different idiosyncratic issues.”
“The only general problem we can speculate at this stage is that higher yields have forced banks, forced to hold large amounts of sovereign bonds against liquid deposits, to sell these high-quality bonds. It means we may have an unrealized loss of $1,000,000,” said lead economist Adam Slater.
“Most banks, including Credit Suisse, know that their exposure to higher yields is heavily hedged. is difficult to ascertain.”
Nonetheless, Slater noted that “fear itself” could cause depositor flight, making it important for central banks to provide liquidity.
The US Federal Reserve (Fed) moved quickly to protect depositors by creating a new facility in the wake of the SVB collapse. Meanwhile, the Swiss National Bank, with active involvement from the European Central Bank and the European Central Bank, has also expressed its continued support for Credit his Switzerland. Bank of England.
“The most likely scenario, therefore, is for central banks to remain vigilant and provide liquidity to help the banking sector through this episode. As such, it means that tensions will gradually ease,” suggested Slater.
But Kenningham argued that while Credit Suisse is seen as a weak spot among Europe’s big banks, it’s not the only bank to suffer from poor profitability in recent years.
“Furthermore, this is the third ‘one-off’ issue in several months, following the UK gilt market crisis in September and the collapse of a US regional bank last week, so no other issues arise. It’s absurd to assume that… way,” he concluded.
— CNBC’s Katrina Bishop, Leonie Kidd, and Darla Mercado contributed to this report.
[ad_2]
Source link