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Over a weekend of dealings likened to a John Le Carre Novel Swiss banking giant UBS Group has agreed to acquire the 167-year-old lender Credit Suisse
[See the full post at: UBS to Buy Credit Suisse in $2B All-Stock Deal, Includes SNB $US100 Billion Liquidity Line]Credit Suisse holders of CHF 16bn (circa US$17bn) of AT1 bonds have been wiped out.
Additional Tier 1 debt will be written down to zero on the orders of the Swiss regulator FINMA.
FINMA says the decision would support the bank’s capital
U.S. Treasuries lows after backpedaling from their initial highs.
Treasuries began dipping immediately after cash open after a night that saw strength from Treasury futures. Shorter tenors led the overnight advance, but they have also been at the forefront of the recent reversal from opening levels. The early pullback has lifted the 30-yr yield above its opening level from Friday while yields on shorter tenors remain below their opening levels from the Friday session. Equities are off to a mixed start with the S&P 500 (+0.4%) holding a modest gain while the Nasdaq (-0.3%) lags.
Yields
2-yr: +12 bps to 3.94%
3-yr: +11 bps to 3.79%
5-yr: +9 bps to 3.56%
10-yr: +8 bps to 3.47%
30-yr: +6 bps to 3.66%New York Community (NYCB 9.03, +2.49, +38.0%) a winning standout from the bank industry after news that it will acquire certain assets and assumes certain liabilities of Signature Bridge Bank From the FDIC.
The SPDR S&P Bank ETF (KBE) is up 4.6% and the SPDR S&P Regional Bank ETF (KRE) is up 5.3%.
European Banks pulling back losses after #CreditSuisse takeover and CHF 16bn (US$17bn) of AT1 bonds wiped out.
$UBS 18.905 +0.705 3.87%
Banco Santander, S.A. $SAN
3.4350+0.1450 +4.4073%
BNP Paribas ADR $BNPQY
$28.19 3.00% +0.82Angst around the banking industry persists, evidenced by the material decline seen today in shares of First Republic Bank (FRC 12.18, -10.85, -47.1%).
Shares of First Republic Bank continued to suffer sharp losses today after FRC’s debt was downgraded at S&P to B+ from BB+. There was a short-lived recovery attempt in FRC when The Wall Street Journal reported that JPMorgan Chase’s (JPM 127.14, +1.33, +1.1%) Jamie Dimon is leading talks with executives at other banks about a deal that could involve converting the previously announced $30 billion in deposits into a capital infusion. Ultimately, however, FRC closed near its worst levels of the day.
The SPDR S&P Bank ETF (KBE), which was up 4.5% at its high this morning, closed with a slimmer 1.6% gain and the SPDR S&P Regional Bank ETF (KRE), which was up 4.9% at its best level of the day, had a 1.2% gain by the close.
UBS (UBS 18.80, +0.60, +3.3%) acquisition of Credit Suisse (CS 0.94, -1.06, -53.0%) for a “takeunder” price of $3.2 billion.
First Republic $FR shares trading higher pre-market following reports JPM and other large banks were in talks to stabilize the bank.
$FRC 14.44 +2.26 (+18.56%) Pre-MarketMoody’s affirms the ratings of #UBS Group AG (A3 Senior Unsecured) and changes outlook to negative.
– UBS aiming to enter talks to terminate First Boston deal, according to FTUBS AG (UBS) and Credit Suisse (CS) both slipping in after-hours trading on report that they are among banks facing DOJ Russia-sanctions probe, according to Bloomberg… no indication for UBS; CS down 0.2%
In U.S. v. Hwang et al, U.S. District Court, Southern District of NY Thursday #Archegos Capital founder Bill Hwang failed to dismiss indictment accusing him of fraud in March 2021 collapse
U.S. District Judge Alvin Hellerstein in Manhattan rejected arguments that the 11-count indictment should be tossed because prosecutors deceived Hwang into cooperating with their probe and because Hwang’s trading activity had been lawful.
Hwang said federal prosecutors, long before his arrest last April, had viewed him as the mastermind of a vast market manipulation scheme, and induced him during several interviews and meetings over six months to divulge his defense strategy.
But the judge said prosecutorial misconduct could justify a dismissal only if it substantially influenced the grand jury’s decision to indict, or there was “grave doubt” that there was no such influence.
“There is no support in the record for such a finding,” Hellerstein wrote.
He had said during a Tuesday hearing that prosecutors were free to change their minds in the course of a probe.
Hellerstein also rejected a dismissal request by Hwang’s co-defendant, former Archegos chief financial officer Patrick Halligan.
Lawyers for both defendants did not immediately respond to requests for comment.
Archegos collapsed in March 2021, causing billions of dollars in losses for banks such as Credit Suisse Group AG (CSGN.S) and Nomura Holdings Inc (8604.T).
Hwang was accused of having borrowed aggressively and using total return swaps, a type of financial contract, to boost the effective size of Archegos’ market positions in stocks such as ViacomCBS and Discovery to more than $160 billion.
Authorities said Hwang concealed the size and riskiness of his bets by spreading his borrowing among several banks.
When the prices of some stocks fell, Hwang was unable to meet margin calls, leading banks to dump stocks backing his swaps, and causing losses for Archegos and others.
The case is U.S. v. Hwang et al, U.S. District Court, Southern District of New York, No. 22-cr-00240.
Fitch Ratings said the takeover of Credit Suisse. $CS, by UBS, $UBS, prevents a full-fledged banking crisis with significant consequences for Switzerland’s public finances.
Equity indices in the Asia-Pacific region ended Wednesday on a mostly higher note.
—Equity Markets—
Japan’s Nikkei: +1.3%
Hong Kong’s Hang Seng: +2.1%
China’s Shanghai Composite: -0.2%
India’s Sensex: +0.6%
South Korea’s Kospi: +0.4%
Australia’s ASX All Ordinaries: +0.2%
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