It was another wild weekend in banking news, so let’s go through the headlines and summarize what happened. 📰
The biggest story of the day is the shotgun marriage between Switzerland’s two largest banks. Sunday afternoon, it was reported that UBS agreed to buy its embattled rival Credit Suisse for 3 billion Swiss francs (~$3.2 billion). This was up from the initial $1 billion offer made by UBS and will see investors receive 1 UBS share for every 22.48 Credit Suisse shares they own.
However, the deal would not go down without additional government support. The Swiss National Bank is pledging a loan of up to 100 billion Swiss francs to back the takeover. And the Swiss government will also assume losses of up to 9 billion Swiss francs from certain assets to reduce UBS’ risk. 🛡️
Ultimately, neither of these banks is in the best shape. Just take one look at their stock charts over the last two decades. However, the deal is seen as one that helped avoid any immediate systemic crisis. 🤷
As for shareholder reactions, Credit Suisse’s largest shareholder isn’t happy about the deal. The Saudi National Bank confirmed an 80% loss on its recent investment in the Swiss bank. Meanwhile, UBS rose about 3% on the news as investors assess what it means for its longer-term market position. 🕵️
Next up, the U.S. Federal Reserve and central banks from Canada, England, Japan, Europe, and Switzerland unveiled new support over the weekend. Their coordinated action “is designed to enhance the provision of liquidity through the standing U.S. dollar swap line arrangements.” Essentially, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of seven-day maturity operations from weekly to daily. This is another effort to improve the market’s overall liquidity. 💱
Back in the U.S., First Republic Bank fell another 47% to fresh all-time lows. The regional bank’s shares continue to plummet despite last week’s $30 billion deposit from eleven of the U.S.’s largest banks. It’s now reported that JPMorgan is advising the bank on strategic alternatives. Some floated options include a capital raise, a sale of the bank, and more. Nothing is off the table, given outflows from the bank continue amid falling confidence. 🔻
An interesting tweet from The Kobeissi Letter pointed out that First Republic Bank shares were halted 11 times today and over 70 times over the last week. According to a quick search, that may be the most times a single stock has been halted in history—nothing to inspire confidence in depositors and shareholders like a week of erratic trading. 😮
New York Community Bancorp ($NYCB) rose 31% after the Federal Deposit Insurance Corporation (FDIC) agreed to sell NYCB deposits and loans from Signature Bank. Its subsidiary, Flagstar Bank, will assume substantially all of Signature Bank’s deposits, some of its loan portfolios, and all of its 40 former branches. That would leave roughly $60 billion in loans and $4 billion of deposits in the FDIC’s receivership. 💰
Meanwhile, the FDIC continues its search for a buyer of Silicon Valley Bank. It had trouble finding interested suitors last week, so it’s holding two separate auctions: one for its traditional deposits unit and one for its private bank. The more important news is that it will allow bank and non-bank financial firms to bid on the asset portfolios as it looks to broaden its list of potential buyers.
And lastly, Warren Buffett is reportedly in talks with the White House over the current U.S. banking crisis. Buffett and Berkshire Hathaway are often seen as one of the “lenders of last resort,” given their cash piles, but nothing concrete has come out about this yet. 🐐
For now, all eyes are on Wednesday’s Federal Reserve interest rate decision, economic projections, and commentary. As always, we’ll keep you updated as the saga continues. 👀