Oil prices and global shares fell after UBS unveiled plans to buy its struggling Swiss rival Credit Suisse for US$3.2 billion over the weekend.
UBS bought Credit Suisse for more than $3 billion on Sunday.
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European banks bank stocks slid Monday, reinvigorating concerns about the financial system as already-turbulent markets respond to Swiss banking giant UBS purchasing stricken rival Credit Suisse in an emergency deal brokered after the failure of two U.S. banks.
Key Takeaways
- Credit Suisse shares slid more than 60% at the start of trading on Monday morning in Zurich, continuing a poor streak that saw shares hit an all-time low last week.
- UBS shares also dropped more than 9% in early trading.
- Other leading European banks, including BNP Paribas, Société Générale, Santander and Deutsche Bank were also down between 3% and 6% on Monday morning.
- They lead a broader market dip in Europe, with key indexes also down, including London’s FTSE 100 (0.8%), Germany’s Dax (0.35%), France’s CAC (0.3%) and Spain’s Ibex (1.04%).
- The price of oil also hit its lowest level since December 2021, with Brent crude, a major international benchmark, falling 2.5%, continuing a recent downwards trend and approaching $70 a barrel.
UBS announced plans to buy its beleaguered Swiss rival Credit Suisse on Sunday. The $3.2 billion deal, partly an effort to calm roiling financial markets, is a huge discount given Credit Suisse’s market valuation and heralds the creation of a new Swiss banking behemoth and the start of a new era for lending in Switzerland. It also marks the demise of a once stalwart member of the global financial system that for years was considered too big and too important to fail.
Years of unrest following a string of controversies—including charges of money laundering, sanctions breaches, corruption, fraud and tax evasion, links with collapsed firms Archegos and Greensill Capital and revelations it had spied on its own staff—eroded that position.
Its position grew terminal last week after its delayed annual report acknowledged “material weaknesses” in financial reporting and sent shares into freefall.
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What To Watch For
Credit Suisse’s downfall comes at a poor time for global financial markets, which are already reeling from the recent failure of two U.S. institutions: Silicon Valley Bank (SVB) and Signature. Credit Suisse bondholders are likely to be angry following the deal, as their investments are likely to be wiped out, a move that could exacerbate market worries.
Though the troubled Swiss bank’s problems long predate the collapse of the two institutions, the loss of such a historic institution will also undoubtedly intensify concerns.
In premarket trading early Monday morning, Wells Fargo and JPMorgan Chase were down more than 1% and Goldman Sachs, Citigroup and Bank of America between 0.4% and 0.6%. From market close on Friday, all were down between 3% and 4% on Monday morning.
Asian markets also responded negatively to the news of UBS’ acquisition. Hong Kong’s Hang Seng index fell more than 2.6% on Monday. Japan’s Nikkei 225 was also down 1.4% and the Shanghai Composite Index down 0.48%.
