UBS shares slide 10% as Credit Suisse shares drop by over 60% in the wake of takeover rescue deal

March 20, 2023

UBS shares slide 10% as Credit Suisse shares drop by over 60% in the wake of takeover rescue deal

Shares of Credit Suisse and UBS led losses on the pan-European Stoxx 600 index on Monday, shortly after the latter secured a 3 billion Swiss franc ($3.2 billion) “emergency rescue” of its troubled domestic competitor.

Credit Suisse shares collapsed by 60%, whilst UBS traded 10% lower. This led to further decline in Europe’s banking index, which was down nearly 2% around the same time, with lenders including ING, Deutsche Bank and Barclays all falling by over 4%.

The declines come shortly after UBS agreed to buy Credit Suisse as part of a cut-price deal in an effort to stem the risk of contagion to the global banking system in the wake of the SVB collapse last week.

Swiss authorities and regulators helped to facilitate the deal, announced Sunday, as Credit Suisse looked dangerously close to initial collapse.

The size of Credit Suisse was a concern for the banking system, as was its global footprint given its multiple international subsidiaries. The 167-year-old bank’s balance sheet is around twice the size of Lehman Brothers’ when it collapsed, at around 530 billion Swiss francs at the end of last year.

The UK population faces the biggest fall in spending power for over 70 years as inflation continues to bite

People face their biggest fall in spending power for 70 years as the surging cost of living eats into wages.

The government's independent forecaster said that household incomes - once rising prices were taken into account - would drop by over  6% this year and into next year as well.

Living standards won't recover to pre-pandemic levels until 2027, which was revealed as Chancellor Jeremy Hunt said the economy would shrink this year but avoid recession in his latest spring budget announcement.

Energy and food bills have shot up due to the war in Ukraine and pandemic, and are squeezing household budgets as the current rate of inflation sits in double digits.

It is set to more than halve to 2.9% by the end of this year, according to the Office for Budget Responsibility (OBR). But for now, the figure remains very high, and well ahead of average wages as the cost of living crisis continues to worsen.

The drop in real household disposable income would represent the largest two-year fall in living standards since records began in the 1950s, only emphasising the seriousness of the situation.

The OBR looks at the government's tax and spending plans in the Budget and then predicts how the country will perform over the next five years.

Previously it had expected the UK to fall into recession at the end of last year and continue to shrink all of this year. The last time the UK's economy went into recession was in 2020, at the height of the coronavirus pandemic.

The OBR now expects the UK economy to contract by 0.2% this year but avoid a recession, before an observed growth by 1.8% in 2024, 2.5% in 2025 and 2.1% in 2026.

Argentinian inflation soars past the 100% mark

Argentina's inflation rate has soared past 100% for the first time since the end of hyperinflation in the early 90s as the country's economic crisis continues to take hold.

Inflation hit 102.5% in February, the country's statistics agency said, meaning the price of many consumer goods has more than doubled since 2022.

The Argentinian government has been trying to stem price rises by capping the prices of food and other products.

But the food and drink sectors recently saw the most dramatic increase, with prices growing by 9.8% in February compared to January.

The Argentinian government has long tried to contain inflation, but divisions have marred the country's economic policy as it looks to combat the continued rise in inflation levels.

In December, the International Monetary Fund (IMF) approved another $6bn (£4.9bn) of bailout money as the country looked to ease economic troubles.

It was the latest payout for Argentina in a 30-month programme that is expected to reach a total of $44bn.

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