There will be an increase in the U.S. stock market as investors come together to strike a deal to rescue shaken Swiss lender Credit Suisse. This deal is the latest activity carried out by the authorities to prevent further loss of confidence in the global banking system. UBS, Switzerland’s biggest bank, has decided to buy Credit Suisse to save the financial market after the failure of two American banks that happened earlier this month.
Shares in this bank have fallen 25% over the week, including money from managed investments funds and account holders withdrawing more than $10 million in daily deposits. Swiss National Bank was meant to be saved by the loan of 54 billion dollars, but that still didn’t help with the loss they are facing.
UBS is buying Credit Suisse for $3.25 billion, 60% less than the bank’s worth when the stock market closed on Friday. Shareholders of Credit Suisse will receive 0.76 Swiss francs’ worth of UBS shares in exchange for 1.86 Swiss francs’ worth this Friday. According to the Swiss regulator, owners of additional tier-one bonds that costs $17 billion worth are at higher risk of bank dept because they will suffer a great loss of everything.
Consequences of the purchase
- Dow Jones Industrial Average YMOO has risen by 0.3%
- Nasdaq-100 NQOO and S&P 500 ESOO also rose by 0.3%
- April West Texas Intermediate crude CLJ23 added 0.3% to $66.96
- May Brent crude BRNOO rose 0.4% to $73.25 a barrel on ICE Future Europe.
The U.S. dollar rose 0.3%, while the Japanese USD/JPY was 132.18 yen. The ICE DXY, a measure of the currency against a major rival, rose by 0.1%. U.S. Treasury TYOO, which, during this period, was slightly lower.
This purchase made the stock market share value of UBS $65 billion on Friday, as it made the highest profit of $7.6 billion in 2022. The Swiss National bank will loan 100 billion Swiss francs to Credit Suisse and UBS to increase liquidity.
Due to the takeover, both UBS and Credit Suisse became the 30 most important banks in the global financial system, and they both have $1.7 trillion in assets.