Jobs at risk after UBS takeover of Credit Suisse; FTSE 100’s biggest rally of 2023 – as it happened

Time to wrap up…. here are today’s main stories so far:

We’ll be back tomorrow for the latest in the banking crisis, February’s UK inflation report, and an eagerly awaited Federal Reserve decision on US interest rates….

21 Mar 202312.46 EDT

Hunt’s pensions tax break expected to help ‘nearly as many bankers as doctors’

Richard Partington

Jeremy Hunt’s pensions tax break for the highest 1% of savers in Britain stands to benefit almost as many bankers as doctors, an economist has said, as the government insisted the budget giveaway was designed to cut NHS waiting lists.

On a day of renewed pressure over the £1bn giveaway, Rishi Sunak argued that scrapping the tax-free lifetime allowance on pensions would encourage more doctors to stay in employment rather than taking retirement.

However, the government has been warned that abolishing the almost £1.1m limit could have a minimal impact on boosting employment, while Labour has promised to reverse the measure.

Torsten Bell, the chief executive of the Resolution Foundation, said official figures suggested that about 20% of the savers likely to benefit from the change worked in the finance industry.

Bell said:

“It is, yes, lots of doctors – so about a quarter of them are doctors or other senior high-paid medical staff. Twenty per cent, though, work in the financial services sectors. So nearly as many bankers as doctors.”

In the City… the FTSE 100 index has racked up its best day since early last November.

The blue-chip index has closed 132 points higher at 7536 points, a gain of 1.79% – the highest percentage rise and points gain in four months.

The market was lifted by a recovery in bank stocks, with the Credit Suisse takeover agreed and the US hinting at more protection for American bank deposits.

Oil also picked up after a bad day on Monday, as fears that a banking crisis might trigger recession eased.

Michael Hewson of CMC Markets sums up the day:

We’ve seen a broad-based rebound in European markets today with the FTSE100 back above 7,500 driven by a recovery in banks and energy. We’re also seeing decent gains for European banks, led by UBS, UniCredit, Commerzbank and Deutsche Bank.

Today’s rebound in the banks appears to suggest we may have found a short-term base, as confidence slowly returns after the volatility of the last few days and yields rebound, after the big losses from last week. Amongst the best performers we’re seeing strong gains from the likes of NatWest Group, Barclays, and Lloyds Banking Group.

A rebound in oil prices is also helping to drive gains in BP and Shell, as fears over a banking crisis ease.

Rolls-Royce shares are higher on reports it has signed a memorandum of understanding with Finland’s Fortum to explore opportunities to deploy small modular nuclear reactors in Finland and Sweden.

JD Sports shares are higher on a positive read across from Foot Locker’s numbers after the close in the US last night.

Switzerland’s finance department has issued an order to Credit Suisse to temporarily suspend certain forms of variable pay (ie bonuses) for the bank’s employees, Reuters reports.

The Swiss Federal Council said in a statement that:

“This measure relates to already granted but deferred remuneration for the financial years up to 2022, for example in the form of share awards,”

The government said that deferred payments that were already in the process of being paid out were exempt from the order.

The Swiss government also instructed its finance department to propose further measures on variable remuneration for Credit Suisse.

Over in parliament, UK chancellor Jeremy Hunt has warned that UK inflation over 10% is ‘dangerously high’ (it may fall into single-digit territory tomorrow morning).

Hunt also told the House of Lords economic affairs committee that the root cause of difficulties in the banking sector was probably the speed of global interest rate rises.

Those rate increases have pushed down the value of bonds held by banks, such as Silicon Valley Bank, as explained here.

UBS wants to cherry pick top dealmakers from Credit Suisse’s investment bank instead of supporting the plan to build a new independent firm, Bloomberg reports.

They say:

UBS executives have told their Credit Suisse counterparts that they prefer selectively bolstering their own investment bank while dumping the riskier operations, the people said, asking for anonymity because the review has just begun and no final decisions have been made.

21 Mar 202311.23 EDT

Full story: Thousands of UK jobs at risk after UBS takeover of Credit Suisse

Anna Isaac

The fate of thousands of jobs in London’s financial district is in doubt after the emergency merger of Swiss banks UBS and Credit Suisse, my colleague Anna Isaac reports.

The two lenders are yet to spell out in detail what their rushed union may mean for the more than 5,000 Credit Suisse and about 6,000 UBS staff based in London.

The Swiss government forced through a takeover of Credit Suisse by its rival UBS on Sunday for almost $3.25bn (£2.65bn) – well below its market value at the time – amid fears its collapse could trigger a banking crisis.

Sources at Credit Suisse told the Guardian they expected investment banking roles to be the worst-hit group among those based in London, and as many as 20% of workers would be lost across other business areas.

“There is no clarity on what this merger means for us other than there will be fewer jobs to go around. In that environment, we’re all rewriting our CVs and trying to hold it together,” one source said.

Insiders added that it was too soon to provide any certainty on the total number of workers who may lose their jobs. Some staff within the bank’s wealth and asset management arms had been offered retention payments by UBS, amid cross-sector competition for high performers, sources said.

Credit Suisse and UBS declined to comment on plans to cut or reconfigure the new joint workforce.

More here:

Both the US dollar and the pound have slipped today, as traders wonder if central banks are close to ending their interest rate hikes.

Against a basket of currencies, the dollar is down 0.25% today, ahead of tomorrow’s interest rate decision from the Federal Reserve.

The pound, though, has lost half a cent against the dollar to $1.222. Against the euro, sterling has lost 1% to €1.134.

The Fed is expected to raise US interest rates by a quarter-point on Wednesday.

Thursday’s Bank of England decision could be harder to call, with the money markets split fairly evenly between a quarter-point rise, and no change.

Legal & General chief executive Nigel Wilson has said the recent turmoil in the banking industry was unfortunate.

During an online briefing with the media, Wilson – who is stepping down this year – also said he was worried lending will go down, saying:

“It’s unfortunate what’s happening in the banking industry,”.

Earlier this month, Wilson warned that the UK was a low productivity economy, hampered by sluggish growth, high regulation and low wages.

US Treasury secretary Janet Yellen is speaking to the American Bankers Association’s conference in Washington.

As flagged earlier, she has suggested that depositors at smaller US banks could be offered more protection, if there were to be further bank runs.

Yellen explained that the US banking system is sound, despite recent pressures, and pledged to stay vigilent in the days and weeks to come.

She described the US financial system as the safest and most liquid in the world.

And she said the US government was ready and prepared to take the steps necessary to ensure that bank desposits, and the banking system, are safe.

Yellen also urged Congress to raiased the US debt ceiling, saying this should be done without conditions.

It is vitally important, she added, to put the US on a sustainable fiscal path.

Claire Williams of American Banker has more details:

US home sales have jumped by much more than expected last month, as the spring selling season got underway.

Sales of previously owned homes rose 14.5% in February compared with January, according to a seasonally adjusted count by the National Association of Realtors. That lifted sales to an annualised rate of 4.58 million units.

It was the first monthly gain in 12 months and the largest increase since July 2020 (just after the start of the Covid-19 pandemic), points out CNBC.

An easing in mortgage rates around the turn of the year may have helped buyers.

“Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” said Lawrence Yun, chief economist for the Realtors, adding:

“Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”

Average prices dipped, though. The median price of an existing home sold in February was $363,000, a 0.2% drop compared with February 2022.

Rating agency Fitch has put Credit Suisse on Rating Watch Evolving (RWE), a sign that it would either raise or lower the bank’s credit rating following its takeover by UBS.

Fitch says is it likely to upgrade Credit Suisse if the bank’s merger with UBS proceeds as planned, “because the resulting business combination will likely result in improvements to Credit Suisse’s franchise and business model, risk management and funding and liquidity profiles.”

But should the transition fail, there is "the risk of a downgrade”, Fitch adds (not implausible, given UBS is basically rescuing Credit Suisse…).

Fitch says:

The RWE reflects Fitch’s view that the planned acquisition by UBS should strengthen the group’s business profile, and the risk of a further weakening if the transaction does not go ahead.

Over in Canada, inflation has slowed by more than expected.

Consumer prices across Canada rose by 5.2% per year in February, down from 5.9% in January.

That’s the largest deceleration in the headline CPI since April 2020.

Statistics Canada cautions, though, that prices remain elevated, although inflation has slowed in recent months.

Compared with 18 months ago, for example, inflation has increased 8.3%.

UK inflation data is due tomorrow morning, and expected to show a slowdown too – perhaps from 10.1% per year to 9.9%.

UK banks are pushing the FTSE 100 higher in London.

The blue-chip index is now up 145 points, or almost 2%, at 7547 points, with NatWest up 7% and Barclays gaining 5.7%.

Wall Street has followed Europe’s lead, rallying in early trading.

• Dow Jones industrial average: up 292 points or 0.9% at 32,536

• S&P 500: up 40 points or 1% at 3,992 points

• Nasdaq Composite: up 114 points or 1% at 11,789

Major Wall Street banks, like their smaller counterparts, are leading the rally. JP Morgan and Goldman Sachs are both up 2.8%, leading the Dow risers.

Ding ding ding goes the Wall Street opening bell…. and up up up go share in US regional banks.

First Republic is trying hard to stage a recovery, they’re up 30% at the start of trading, a day after tumbling 47%.

This follows reports that JP Morgan CEO Jamie Dimon is working on a new rescue proposal for the San Francisco-based bank.

The possibility that the US government might extend guarantees on bank deposits are helping other regional banks too.

PacWest Bancorp, based in Los Angeles, has jumped 10%.

As covered at 11.26am GMT, US Treasury secretary Janet Yellen is expected to tell American bankers today that the US government could provide more backing for deposits at smaller American banks if needed.

New York Community Bancorp has gained 6%, after an upgrade by DA Davidson.

Zions, of Salt Lake City, are also up 6%.

Wall Street is set to open higher in around 15 minutes, as anxiety over the banking crisis eases.

Regional bank stocks are expected to jump, after today’s reports that Janet Yellen will signal further US government backing for deposits at smaller American banks if needed (see earlier post)..

Just Eat Takeaway has confirmed that it laying off 1,700 couriers, as part of a reorganisation.

Europe’s largest food online ordering and delivery service is ending a service by which it employs its own couriers in several UK cities. Another 170 people in the company’s operational department will also be impacted.

Just Eat said it will retain the employed courier model in most parts of continental Europe.