Quilter Cheviot|Weekly Comment

UBS acquires Credit Suisse as banking concerns grow

Our Weekly Market Overview from Quilter Cheviot

By Alan McIntosh, Chief Investment Strategist

Greater concerns surrounding the health of the global banking system have weighed on stock markets and sent investors piling into government bonds in recent trade. That said, the MSCI All Country World Index was broadly flat last week, leaving the benchmark with year-to-date gains of 2.2% and US benchmarks even managed to chalk up a weekly gain despite heavily negative news flows.

Reports over the weekend that UBS has agreed a US$3.25bn rescue deal for Credit Suisse is welcome in that it shows a failure has been averted, though the fact that one of the largest global investment banks required rescuing, and at a price well below Friday’s closing market value, speaks volumes about the financial health of Credit Suisse.

The acquisition will see UBS pay Sfr0.76 (Swiss francs) a share in its own stock, almost 60% less than the Sfr1.86 closing price from last week. The Swiss National Bank (SNB) has also offered its support, providing a Sfr100bn liquidity line and a loss guarantee of up to Sfr9bn – but only after the first Sfr5bn of losses has been taken by UBS…

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