You’re officially a talking head on Credit Suisse

Lost 9% of assets this quarter

Goodwill impairment of CHF 1.3bn, which is, er, all of it

Credit Suisse indicated that although flows have slowed, it has not turned around. Unsurprisingly Credit Suisse is guiding that it will remain loss making for the rest of the year. The CHF 300 million loss for the quarter in the good bank seems manageable especially if one considers that UBS intend to achieve CHF 8 billion of cost savings over time and wind down the problematic investment bank even further. Net interest margins suffered greatly as Credit Suisse had to access emergency liquidity and pay up for deposits. UBS will hope that its balance sheet strength will turn the margin erosion around quickly.

Morningstar Banking Expert, Johann Scholt

if the merger were not to be completed, our financial viability could be jeopardized, which would raise substantial doubt regarding our ability to continue as a going concern.

Worth remembering this merger is not yet finalised

The merger is subject to the satisfaction (or waiver, to the extent waivable, by UBS) of a number of conditions as set forth in the merger agreement, including, among others, (i) receipt of approval of the transaction by FINMA and granting by FINMA of arrangements separately agreed upon and such decisions and arrangements remaining in full force and effect and not having been amended, conditioned or revoked before completion, (ii) receipt of certain other regulatory approvals that are not subject to any condition, restriction or undertaking that would reasonably be capable of causing a material adverse effect on us, UBS, any of our or UBS’s subsidiaries or other affiliates, or the combined group and (iii) receipt of certain governmental approvals that are not subject to any condition, restriction, obligation or undertaking that would result in any disposal of any UBS asset or business or that would reasonably be capable of causing a material adverse effect on us, UBS, any of our or UBS’s subsidiaries or other affiliates, or the combined group.

Izabella Kaminska12:05

Quick flyby from me on the fact that some Swiss-based investors are calling for an investigation in credit suisse. Here’s what we published in the Politico Financial Services newsletter last week:

If the deal fails it will probably mean bankruptcy

So it had better not fail…

But both UBS and CS Swiss banks under the same roof, as it were, creates concentration for the Swiss banking industry that FINMA or the government might find unacceptable

So I wouldn’t rule out UBS being forced to spin off CS’s Swiss bank. Which is currently its only profitable division.

11:11Even if regulators don’t force a spin-off, I think CS depositors might leave anyway, because the concentration would be a risk for them

Hearing that Julius Baer might be a beneficiary of deposit flight to avoid concentration risk

large banks being forced to take over other large banks tends not to end well

11:22But what would be the alternatives to this merger?

Capital injection by the Swiss government?

11:23Presumably no-one would consider allowing it to file for bankruptcy Lehman-style.

@Helmholz, yes the AT1 writedown is a massive capital injection as is evident from the earnings release, but it could be overturned in the courts, as could the UBS indemnity

AT1 writedown turned a CHF 1.3bn loss into a CHF 12.8bn profit

and CET1 ratio of 20.3%

also the SNB has provided loans which are also being questioned

https://www.reuters.com/business/finance/credit-suisse-bondholders-sue-swiss-regulator-over-17-bln-bond-wipeout-ft-2023-04-21/

Switzerland have a lot resting on this case

SNB liquidity support was enormous

The Swiss National Bank (SNB) granted Credit Suisse access to significant credit facilities that provide substantial liquidity support to the bank, a portion of which are supported by default guarantees provided by the Swiss government. As of March 31, 2023, the net amount of borrowings under these facilities amounted to CHF 108 bn after repayments of CHF 60 bn in the quarter, with further repayments of CHF 10 bn as of April 24, 2023.

11:31Swiss prosecutors are already investigating the legality of the deal. Reuters reported it three weeks ago. https://www.reuters.com/business/finance/ubs-credit-suisse-drop-after-swiss-prosecutor-probes-takeover-deal-2023-04-03/

The office of the attorney general said on Sunday that the prosecutor opened an investigation into the state-backed takeover of Credit Suisse by UBS Group last month, looking into potential breaches of the country’s criminal law by government officials, regulators and executives at the two banks.

11:33UBS shareholders seem happy though – shares up 18.64 today.

UBS results tomorrow will be interesting.

Just saw this flash

LVMH becomes first European $500bn company

LVMH’s market value has surpassed $500bn, becoming the first European company to reach that milestone, thanks to booming sales of luxury goods in China and a strengthening euro.

The achievement comes less than two weeks after LVMH joined the ranks of the world’s 10 biggest companies, powered by a surge in first-quarter sales.

Rival Hermes International subsequently published its own strong numbers, reinforcing the view that China’s reopening from pandemic lockdowns is fueling growth across the industry.

The company’s rising value has swelled the wealth of the world’s richest person, Bernard Arnault, who built LVMH into a global powerhouse through a series of acquisitions.

His fortune stands at almost $212 billion, according to the Bloomberg Billionaires Index.

Speccie doesn’t seem to have updated its index, but it doesn’t make a difference.

But if Tesla keeps cutting prices it might lose its position

on several fronts

A group of Tesla investors have accused the company of mismanagement and are seeking a meeting with its board to discuss the performance of chief executive Elon Musk.

The 17 shareholders, who hold more than $1.5bn of Tesla stock, said Mr Musk is distracted by his commitments to other companies and must be reined in, according to an open letter they sent to chairman Robyn Denholm and director Ira Ehrenpreis on Friday.

They want the board to come up with a plan to do so and seek to remove directors too closely tied to the chief executive.

“There is collective frustration,” said Ivan Frishberg, the chief sustainability officer for Amalgamated Bank, a union-owned bank that has 722,070 shares in Tesla across its various funds.

“Over the last year, it became quite clear that Tesla suffers from a governance problem.”

Are you a blue tick Frances?

I think Izzy is

I am now just a pleb

Which is quite possibly illegal in several countries

11:48I think the best thing to do now is kill the blue tick for paid subscribers. You don’t need a badge saying “I’m paying Elon for better reach and additional features”, you just want the reach and the features.

He’s already halfway there with his proposal to allow people to hide the blue tick.

11:50Can we talk about Bed Bath and Beyond? Yesterday it filed for Chapter 11 bankruptcy

Fire sale of assets and gradual closure of the stores.

Largest creditor is BNY Mellon – owed over $1bn

Rest are trade creditors

Seems to be another company that has failed to keep up with the growth of online shopping

but it really needed to change direction long ago. Left it too late. Add it to the same pile as Maplin and Toys R Us.

11:58It did try to find a buyer https://www.reuters.com/business/retail-consumer/bed-bath-beyond-efforts-find-buyer-stalled-bloomberg-news-2023-01-27/

but this really isn’t a good time to sell a distressed retail conglomerate

with heaps of debt and lots of expensive stores

We’re almost at an end… anything else we need to talk about, Anjuli?

Thanks for another great session Frances

12:02