by Samuel Mbaki | Jun 12, 2023 | Banking
Key Points
- UBS completes take over of Credit Suisse days after signing a loss protection agreement with the Swiss government
- The bank is set to have an enlarged balance sheet of $1.6T and a workforce of over 120K
UBS becomes the new owner of Credit Suisse and its assets
UBS, a Swiss banking giant, has completed the takeover of Credit Suisse following its collapse in March 2023. The bank will now be in charge of a balance sheet worth over $1.6T and a workforce of around 120K professionals.
The news comes days after Fintech Express reported that the bank had completed a deal with the Swiss government for loss protection. On June 12, 2023, the bank said it had completed the deal and looked forward to the next chapter in its business journey and history.
“Instead of competing, we’ll now unite as we embark on the next chapter of our joint journey,” UBS Group’s new CEO Sergio Ermotti said in a statement.
UBS group is set to manage the two banks as separate entities in the short term while assessing options for the future of Credit Suisse’s assets for the future. In an open letter, Credit Suisse chiefs said they would not also want to compromise the string work culture at UBS or its conservative risk approach.
The Swiss banking giant said that it expects the operating losses and significant restructural changes at Credit Suisse to be offset as it seeks to ditch risk-weighted assets. It added that it foresees a common equity tier 1 capital ratio of around 14% for the remaining part of the year.
Keep watching Fintech Express for more updates on Banking and other fintech-related news and developments.
by Samuel Mbaki | Jun 9, 2023 | Banking
Key Points
- The Swiss government has reached a pact with UBS over their protection amid the collapsed Credit Suisse bank takeover.
- The pact will come to effect as soon as the takeover is completed.
UBS and Swiss government reach an agreement over Credit Suisse take over
UBS and Swiss government have agreed to protect the investors amid the takeover of the collapsed banking giant Credit Suisse. The two announced on June 9, 2023, that they reached an agreement, which will take effect once the takeover of Credit Suisse is completed.
UBS and Swiss government deal will see the Swiss government cover up to 9 billion Swiss francs ($10B) following UBS’s acquisition of Credit Suisse.
“As part of the agreement, the Swiss government guarantees losses of up to CHF 9bn if realized on a designated portfolio of Credit Suisse non-core assets once UBS bears the first CHF 5bn of any realized losses,” UBS said in a statement.
They went ahead to say that they will manage the assets previously owned by Credit Suisse diligently to minimize losses which maximize value realization on them. Credit Suisse’s acquisition is expected to be completed as early as June 12 per UBS.
Developing story. Keep watching Fintech Express for updates as soon as they happen.
by Samuel Mbaki | Jun 8, 2023 | Banking
Key Points
- Eurozone records two consecutive quarters of negative GDP growth.
- More pain for Brits as Eurozone starts a recession while inflation rates are high; BoE may continue hiking rates.
- Higher costs of living are expected among Eurozone residents.
Financial crisis bites harder on Brits as Eurozone enters recession amid high inflation rates
Eurozone has plunged into a recession sending negative waves through the market. Brits will have to tighten their belts for tougher economic times ahead. The region has been experiencing one of the highest inflation rates this year among the strongest economies hitting over 10% and sustaining for a long time.
The Bank of England has been working hard to combat the rising inflation rates by raising interest rates. Though this has proved effective, they still need to reach the target 2% inflation rate target for ending 2023. This target seems out of reach as time passes, as the hike in interest rates in an already shaken economy has contributed to reversed economic growth.
Market data shows that Eurozone has had two consecutive quarters of reversed GDP growth. The region’s economy shrank by 0.1% in Q1 2023, a similar growth to the final quarter of 2022. That marks the start of a technical recession. The news comes to an already shaken European Stocks Market that is marked to cuts its profitability by almost 50% by the end of the year.
The one currency zone follows Germany into slipping into a recession though the country is fighting to get out of it. Brits will have to tighten themselves more as experts predict a further shrinking of the GDP. Also, the Bank of England needs to find a way to pause rate hikes to avoid embedding the inflation rates.
Keep watching Fintech Express for updates on Macro finance and other Fintech-related developments.
by Samuel Mbaki | Jun 6, 2023 | Banking
- According to predictions by Morgan Stanley, top European stocks may lose their value in summer by over 10%.
- The drop is most likely to happen owing to the continued decline in economic growth and deteriorating liquidity in the European Zone.
Morgan Stanley expects a significant price fall in top European stocks
Morgan Stanley has predicted that the top European stocks may fall by over 10% this summer as a harsh economic season grapples the Euro Zone. Morgan Stanley has already cut its sector rating on financial to neutral in favour of Pharmaceuticals.
According to Morgan Stanley, European companies have held up better than others in the rest of the world in 2023 despite facing more challenging economic times. However, they haven’t gone unimpacted as their profits this year are set to decline to 6%, which is still higher than the estimated 10%.
“We still expect a down cycle from the second half of 2023 onwards due to declining margins and slowing economic growth (which we believe is only just beginning),” said Graham Secker, head of European equity strategy at Morgan Stanley.
Keep watching Fintech Express for updates on Macro-Finance and other fintech-related developments.
by Samuel Mbaki | Jun 5, 2023 | Banking
Key Points
- The IMF Managing Director Kristalina Georgieva has expressed concern with the federal reserve not pumping brakes on lending.
- Georgieva also stressed people being active in checking the world economic trends and being agile to adjust correctly as the trends change.
- Meanwhile, most global central banks are tightening their monetary policies to tame inflation rates.
IMF wants to see more federal banks pulling back from lending
In a report by CNBC, the International Monetary Fund is concerned that it is yet to see enough banks pulling back on lending, which could cause them to change course with their rate-hiking cycles.
In the report, IMF Director Kristalina Georgieva told CNBC:
“We don’t yet see a significant slowdown in lending. There is some, but not on the scale that would lead to the Fed stepping back.”
In a May report, the Federal Reserve showed a similar concern over lending and the current economic conditions. The report warned that lenders are worried about the capacity of Americans to continue borrowing, which has resulted in mid-size financial institutions in the country tightening the lending standards for households and businesses.
Fed’s loan officers added that they expect the lending issues to continue through next year as there are low economic growth forecasts already with deposit outflows increasing, which shows a reduced tolerance for risk.
Georgieva noted:
“I cannot stress enough that we are in an exceptionally uncertain environment. Therefore pay attention to trends and be agile, adjusting — should the trends change.”
She added that the positive jobs report shows that the U.S. could continue to hike rates further, which could eventually see the unemployment rate go beyond 4% or 4.5%, significantly higher than the current 3.7%.
The world economy continues declining
Georgieva’s comments come when global economies are shrinking, with a debt of over $305T being recorded. Multiple economies are also struggling with high inflation rates and increased living costs. The U.S. is just days after passing and signing the Fiscal Responsibility Act into a law that seeks to extend its debt ceiling.
The U.K. also struggles with high inflation rates following its deteriorating economy and the monumental Brexit failure. It is being tipped to follow Germany in entering a recession as its central bank continues to push interest rates higher to combat inflation, risking reversed economic growth.
The only unicorn left, the Chinese economy was tipped to resuscitate the world economy upon its reopening. However, it’s been performing dismally off late. It has also shown signs of slowing down, with its stock markets seemingly entering a bear market.
by Samuel Mbaki | Jun 2, 2023 | Banking, Finance
Key Points
- The U.S. Senate has passed the debt ceiling bill preventing the U.S. from defaulting on its debt which would have been the first event of its kind.
- The bill won with a landslide 63 vs. 36 votes within 48 hours after the House passed.
- European stocks have turned around positively following the news that the U.S. wouldn’t default on its debt.
- Economists and on-lookers have shown mixed reactions on Social Media regarding the debt ceiling deal and its effects on the U.S. economy as de-dollarisation plans spread globally.
U.S. Senate prevents a possible debt default
The U.S. Senate has passed the Fiscal Responsibility Act that allows the U.S. to have no cap on the debt ceiling until January 2025. The bill had a landslide win with 63 vs. 36 votes on Thursday night, a day after the House of Representatives had barely passed it.
The new bill will be signed by the U.S. President soon ahead of the June 5 deadline that the Treasury gave as the final date that it would be able to pay its bills. While this bill has helped the nation avoid the first-ever debt default in its history, it has received mixed reactions.
The bill has been projected to allow the printing of $4T more whilst no significant spending cuts have been seen, which has made several lawmakers react with financial experts condemning it since international domination of the U.S. dollar remains in jeopardy now more than ever.
E.U. stocks rise as the U.S. Senate averts a debt default crisis
European Stock markets are headed in a positive direction as they opened higher on June 2, 2023, following news that the U.S. Senate had voted in favour of a bill that would see the nation not defaulting on its debt.
The ongoing debate to deal with the debt ceiling crisis has been going on for the past two weeks but never without influencing global stock markets though slightly. Though it has been settled now, it has just dealt with a minute issue in the U.S. economy as a recession could be possible as it’s reliant on the decisions the federal reserve will make regarding the progression of interest rates.
Recent comments from officials show that the federal reserve may choose to skip the interest rates hike in June as some prospects of the market, like jobs data, are coming out stronger than expected. However, it’s still a difficult decision as the market is sending mixed signals; mortgages are up, but the housing sector has yet to kickstart a price meltdown. Today will see the release of a closely watched labour report that may influence the decisions of the Federal Reserve in June greatly.
Though there is a possibility of rates pausing in the U.S., the ball will most likely roll differently in the U.K. ECB president Christine Lagarde has commented on the current 6.1% inflation rate that is haunting the nation, saying it’s still way too high to suspend interest rate hikes. ECB officials have also been giving signals that interest rates will continue being hiked until the bank closes near the 2% inflation rate target.
Investors, financial experts and on-lookers weigh in on the U.S. debt ceiling deal
The ongoing tension between U.S. and BRICS economic bloc has caused several investors, financial experts and observers to condemn the recently passed Fiscal Responsibility Act. The U.S. is set to go into a money-printing frenzy without a debt ceiling cap until 2025, which concerns several experts.
While it is significant that the U.S. will not default on its debt and cost over 8 million jobs sending millions more below the poverty line, some experts like Balaji feel that the current situation in the U.S. economy will most likely be a liability in the long term.
In his argument, Balaji says that the U.S. dollar will still be in a crisis as international investors are not buying treasury bonds but prefer gold and its financial products. He says that the collapsed banks were buying the Treasury bonds only to realize later that they were interacting with the “new toxic waste.”
Other Representatives of the House had aired their thoughts on the bill condemning it and saying that they wouldn’t vote for it. Though it passed, they felt it would not serve the country well.
Hilariously, one citizen posted a cartoon reaction that depicts poor leadership as the reason behind the financial crisis in the country. He sarcastically thanks President Biden for passing the bill in the U.S. Senate.
