Bank Freakout

Capital Calls: Credit Suisse bump trade

20 Mar 2023

Concise views on global finance: The bank’s shares closed above the implied value of UBS’s $3.2 bln government-backed offer. Investors expecting more may be disappointed.

Switzerland takes CoCos to point of non-viability

20 Mar 2023

Holders of Credit Suisse’s $17 bln of contingent capital will lose the lot despite UBS paying $3 bln for its rival’s shares. The bonds boomed after the last crisis, but uncertain conditions make them riskier than bank equity. If investors flee, they’ll be less useful for banks.

UBS salvages most value from Credit Suisse wreck

19 Mar 2023

The Swiss bank is scooping up its ailing arch-rival for just $3.2 bln in a state-arranged rescue. In return for shoring up confidence it gets a balance sheet backstop, a competition waiver, big savings and a giant capital boost. It also becomes bigger and more systemic than ever.

Americans may not get loans. LBOs? They’re fine

17 Mar 2023

SVB’s rescue means that smaller banks will tighten lending standards, making it more difficult for people to get financing for homes and businesses. But this week, three big private equity deals landed debt from banks. Financial conditions are tightening, but only for some.

Startups lost a wheel greaser with SVB blowup

17 Mar 2023

Venture capital funding was drying up before the collapse of Silicon Valley Bank. But SVB offered loans to new companies and played an important role bridging capital calls between VC managers and investors. Even with one fewer player, the industry gets rustier.

Where is Silicon Valley’s J. Pierpont Morgan?

17 Mar 2023

JPMorgan chief Jamie Dimon channeled his predecessor by corralling fellow bank CEOs to support First Republic. Financiers band together, even with regulators, when the going gets tough. Silicon Valley, more fragmented and libertarian, lacks such a savior. That could change.

Credit Suisse puts new dent in Swiss bank armour

17 Mar 2023

The Alpine country’s solidity is its main selling point for wealthy clients. Yet for the second time in 15 years, authorities have rushed to halt a spiralling crisis of trust at a big Zurich lender. Shoring up the Swiss financial system will only partly repair the damage.

Deposit insurance is addiction not medication

16 Mar 2023

Uncle Sam’s pledge to reimburse all customers of two failed US banks creates the impression all deposits are now guaranteed. That has staved off more runs. But it’s unworkable and unhelpful. Scaling back protection would make banks safer, and be fairer for regular customers too.

SVB’s collapse casts long and global shadow

16 Mar 2023

The US bank’s failure sparked a mass selloff in bank stocks. In this Viewsroom podcast, Breakingviews columnists debate the causes of investor jitters, the long-term implications of intervention by governments and regulators, and the latest concerns about Credit Suisse.

Capital Calls: Gas station M&A

16 Mar 2023

Concise views on global finance: Canada’s $44 bln Alimentation Couche-Tard pays 3.1 bln euros for TotalEnergies’ European gas station cast-offs.

Credit Suisse’s cash line is just a stopgap

16 Mar 2023

The lender will borrow up to $54 bln from the Swiss National Bank to boost liquidity. The move reassured investors, but won’t necessarily stop clients pulling money. Regulators and the government will need a more permanent solution, but none of them are particularly appealing.

Bad news salvo gives Bank of Japan some cover

16 Mar 2023

The collapse of U.S. lender Silicon Valley Bank knocked down sovereign bond yields. Consumption remains soft, and while Japan Inc is hiking wages by 3% on average, that’s well below inflation. There’s nothing to cheer, but it takes pressure off the BOJ to adjust rates.

Goldman’s new strategy gets baptism of fire

15 Mar 2023

Its traders bought bonds from SVB as its bankers tried to help plug the hole that was left. Colleagues in investment may now be able to pick up troubled assets in the wreckage. It’s true to boss David Solomon’s One Goldman vision, though ideally the client lives to tell the tale.

Credit Suisse’s plight calls for outside help

15 Mar 2023

The bank’s stock fell 17% after its top investor said it wouldn’t necessarily buy more shares, citing regulatory barriers. The risk is clients flee. The Swiss National Bank’s reassuring words may help. So would a vote of confidence from a new Warren Buffett-style investor.

SVB proves even smaller banks are too big to fail

15 Mar 2023

It’s 15 years since Bear Stearns showed large-scale failure is contagious. Yet US regulators still struggled with the collapse of a group half its size. If buyers cannot come to the rescue and depositors won’t bear any risk, then even lesser groups will need more protection.

Bank runs don’t change Fed’s focus on high prices

14 Mar 2023

Recent financial turmoil raised market fears over borrowing costs and led some economists to forecast rate cuts as soon as next week. Yet the Federal Reserve cannot tolerate inflation at 6%. The central bank’s next move will probably echo the quarter-point hike that preceded it.

Bank woes make winners of money market villains

14 Mar 2023

Failed lenders like SVB exposed the riskiness of uninsured bank deposits. That boosts the relative appeal of money market funds, which were at the center of the 2008 crisis. With better returns and a history of being bailed out, the $5.2 trillion market stands to grow larger.

European banks priced for profit dip, not crisis

14 Mar 2023

Lenders’ shares have plunged since Silicon Valley Bank failed, but only to January’s levels. Senior bankers like Lloyds CEO Charlie Nunn see no evidence of a US-style deposit rush in Britain. For investors, the fear is that interest rates don’t rise as far, crimping returns.

Banking turmoil could help euro doves cry victory

14 Mar 2023

With inflation running hot, the European Central Bank looked set to raise rates by 50 basis points on March 16. The collapse of two US banks flipped the script. As investors fear financial instability, the ECB might go easier and rely on previous hikes to curb consumer prices.

Startup CEOs learn a lesson in counterparty risk

13 Mar 2023

The venture-backed firms that used Silicon Valley Bank tended to keep large, uninsured piles of cash there. That helped them access credit and other services but concentration was risky. The bank’s failure will bring change – with diversification in banks and in investments.