7 things you may have missed in this week’s banking crisis
Today’s newsletter is here Brian Soci, Editor-in-Chief at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn. Read this and more market news on the go with the Yahoo Finance app.
No doubt Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and every single person remotely connected to the financial services space could use a drink (or five) after a crazy week in the business world.
Long-troubled Credit Suisse (CS) has tapped $54 billion from the Swiss government. The fast-melting First Republic (FRC) received a $30 billion uninsured deposit injection from 11 rival banks. Silicon Valley Bank (SIVB) assets are still being bought by the FDIC after its collapse a week ago.
Bank sources have told the Yahoo Finance newsroom that more bank failures may be on the horizon. The KBW Bank ETF is now down 29% for the month.
And yet analysts still love financial stocks!
Did we mention there is a Federal Reserve meeting next week? One in which Nomura (NMR) believes the Fed will cut interest rates.
Here are a few things that caught our eye during this wild week on Wall Street:
1. A buyer of Credit Suisse?
UBS (UBS) could step in to buy ailing Credit Suisse, speculated JPMorgan analyst Kian Abouhossein in a note to clients.
“We consider a resolution scenario to be the least likely and a 3rd option takeover intervention rather than the most likely scenario, particularly from UBS,” the analyst said.
Exactly what UBS needs in a banking crisis – to take on the assets and culture of a struggling competitor.
2. Demotion of the First Republic
Wedbush analyst David Chiaverini cut his rating on First Republic to Neutral from Outperform and sees the stock plummeting to $5. First Republic shares changed hands at $25 on Friday afternoon.
“We believe that a distressed M&A sale could result in minimal, if any, residual value for common shareholders due to FRC’s significant negative tangible book value after accounting for the fair value marks on its loans and securities,” Chiaverini said. “We recognize that the assets of an M&A target must be measured at fair value in an acquisition.” Brutal.
3. Kellogg’s CEO sees no change from ending food stamp benefits
Kellogg CEO Steve Cahillane told me (video above) he doesn’t see people spending less because emergency food stamp payments stopped earlier this month due to the pandemic. These checks bring low-income consumers an additional $95 a month.
4. FedEx Layoffs
FedEx executives casually, almost dizzily, slipped into their earnings call that they would cut jobs to finally deliver better earnings to investors. “By the end of this fiscal year, we expect US headcount to decrease by approximately 25,000 year-over-year,” executives said.
5. Fed rate cut call
The future favors the brave. To that end, Nomura strategist Aichi Amemiya was first on the street to announce a rate cut ahead of the Fed’s next meeting. His view: “In response to the looming risks to financial stability, we now expect the Fed to cut rates in 25 basis point increments at the March FOMC meeting, compared to a 50 basis point rate hike since February 24.”
6. The legislator has banking regulations in mind
Rep. Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, got into a heated argument with the banks in a conversation with Jennifer Schonberger of Yahoo Finance. “This is about regulation, and this is about the fact that at one point there were big advocates for the regional banks and smaller banks not having to comply with some of the rules that might not have allowed them to get in [this situation]’ Waters said on Yahoo Finance Live. The Reading: The return of tighter banking regulation lurks.
7. Banks to the rescue
Curious how First Republic’s $30 billion deal came about? Dan Fitzpatrick and David Hollerith’s Yahoo Finance team is here to help.
Brian Soci is Editor-in-Chief of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.
For the latest stock market news and in-depth analysis, including events moving stocks, click here
Read the latest financial and business news from Yahoo Finance