No doubt Treasury Secretary Janet Yellen, Federal Reserve chair Jerome Powell and every single person remotely tied to the financial services field could use a drink (or five) after one crazy week in the world of business.
Long-troubled Credit Suisse (CS) tapped $54 billion from the Swiss government. Fast-melting First Republic (FRC) scored a $30 billion uninsured deposit injection by 11 rival banks. Silicon Valley Bank (SIVB) assets are still being shopped by the FDIC after its collapse a week ago.
Banking sources have told the Yahoo Finance newsroom more bank busts could be in the cards. 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) thinks the Fed will CUT interest rates.
Here are a few things that caught our attention during this wild week on Wall Street:
1. A Credit Suisse buyer?
UBS (UBS) could step in to buy ailing Credit Suisse, JPMorgan analyst Kian Abouhossein speculated in a client note.
“We see a resolution scenario as most unlikely in our view and more likely an intervention with the 3rd option of a takeover as the most likely scenario, especially by UBS,” the analyst said.
Just what UBS needs inside of a banking crisis — to assume the assets and culture of a deeply troubled rival.
2. First Republic downgrade
Wedbush analyst David Chiaverini slashed his rating on First Republic to Neutral from Outperform and sees the stock crashing to $5. First Republic stock changed hands at $25 as of Friday afternoon.
“We believe a distressed M&A sale could result in minimal, if any, residual value to common equity holders owing to FRC’s significant negative tangible book value after taking into account fair value marks on its loans and securities,” Chiaverini said. “We note that an M&A target’s assets must be marked to fair value in an acquisition.” Brutal.
3. Kellogg CEO sees no changes from ending food stamp benefits
Kellogg CEO Steve Cahillane told me (video above) he doesn’t see people spending less because pandemic emergency food stamp payments ended earlier this month. Those checks put an extra $95 a month into the hands of lower-income consumers.
4. FedEx layoffs
FedEx execs casually slipped into their earnings call, almost giddily, that they were axing jobs in order to finally deliver better profits to investors. “By the end of this fiscal year, we expect U.S. headcount to be down roughly 25,000 year-over-year,” execs said.
5. Fed rate cut call
The future favors the bold. To that end, Nomura strategist Aichi Amemiya was the first on the Street to drop a rate cut call ahead of the Fed’s policy meeting next. His view: “In reaction to looming financial stability risks, we now expect the Fed to cut rates in 25bp increments in the March FOMC meeting in comparison to where we had previously expected a 50bp rate hike since 24 February.”
6. Lawmakers eye banking rules
Rep. Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, came out swinging against the banks in a chat with Yahoo Finance’s Jennifer Schonberger. “This is all about regulation, and this is all about the fact that at some point in time, there was great advocacy for making sure that the regional banks and smaller banks didn’t have to comply with some of the rules that perhaps would not have allowed them to get into [this situation],” Waters said on Yahoo Finance Live. The read: The return of tighter banker regulation lurks.
7. Banks to the rescue
Curious about how the $30 billion deal for First Republic came to fruition? The Yahoo Finance team of Dan Fitzpatrick and David Hollerith has you covered.