It has been a tumultuous week for the financial services field, with troubled banks and potential bank busts making headlines. Credit Suisse tapped $54 billion from the Swiss government, while First Republic received a $30 billion uninsured deposit injection. Silicon Valley Bank, meanwhile, is still being shopped by the FDIC after its collapse a week ago. With the KBW Bank ETF down 29% for the month, analysts are still surprisingly bullish on financial stocks. Some banking sources have warned that more bank busts could be in the cards, and there is a Federal Reserve meeting next week, with Nomura predicting a rate cut. In this article, Yahoo Finance’s Executive Editor, Brian Sozzi, highlights seven key stories that caught his attention this week on Wall Street.
Important Details about 7 things you may have missed amid this week’s banking crisis –
– Credit Suisse tapped $54 billion from the Swiss government, and more bank busts may be in the cards.
– UBS could step in to buy ailing Credit Suisse, according to JPMorgan analyst Kian Abouhossein.
– Wedbush analyst David Chiaverini slashed his rating on First Republic to Neutral from Outperform and sees the stock crashing to $5.
– Kellogg CEO Steve Cahillane doesn’t see people spending less despite the end of pandemic emergency food stamp payments.
– FedEx is laying off 25,000 workers to deliver better profits to investors.
– Nomura strategist Aichi Amemiya expects the Fed to cut rates in the March FOMC meeting.
– Rep. Maxine Waters is advocating for tighter banker regulation.
– The Yahoo Finance team breaks down the $30 billion deal for First Republic.
Financial Crisis Threaten Banking Industry
The financial services industry has been hit hard over the past week, with troubling developments at long-troubled Credit Suisse and the fast-melting First Republic. Fears of further bank busts continue to rattle the market, with the KBW Bank ETF down 29% for the month.
Despite this, analysts still seem to be bullish on financial stocks. Meanwhile, UBS (UBS) could be considering an intervention to buy Credit Suisse, while Wedbush analyst David Chiaverini slashed his rating on First Republic to neutral.
Several key factors have contributed to this tumultuous period, including the impending Federal Reserve meeting, during which Nomura (NMR) anticipates a rate cut, and lawmakers’ increasing scrutiny of the banking industry.
Here are some notable developments that took place during one of the wildest weeks on Wall Street:
1. Credit Suisse Ailing
Credit Suisse recently tapped $54 billion from the Swiss government, suggesting dire problems at the company. JPMorgan analyst Kian Abouhossein speculated in a client note that UBS (UBS) could purchase Credit Suisse, though this would likely not be good news for UBS during an already-challenging time in the banking industry.
2. First Republic Downgrade
Wedbush analyst David Chiaverini slashed his rating on First Republic to neutral, stating that the stock could crash to $5. His prediction appears to be coming true, as First Republic stock changed hands at $25 as of Friday afternoon. Chiaverini notes that an M&A target’s assets must be marked to fair value in an acquisition, leading to minimal residual value to common equity holders in the event of a sale.
3. Kellogg CEO Downplays End of Food Stamps
Kellogg CEO Steve Cahillane appeared on video saying that he doesn’t see people spending less now that pandemic emergency food stamp payments have ended. These checks would have put an extra $95 a month into the hands of lower-income consumers. However, Cahillane’s statements suggest he may not fully understand the situation.
4. FedEx Layoffs
FedEx executives revealed during an earnings call that they were cutting jobs in order to boost profits. According to the company, “By the end of this fiscal year, we expect U.S. headcount to be down roughly 25,000 year-over-year.” The move demonstrates the company’s focus on profitability, even if it comes at the expense of its workforce.
5. Fed Rate Cut Call
Nomura strategist Aichi Amemiya was the first to call for a rate cut ahead of next week’s policy meeting. Amemiya believes the looming financial risks necessitate the Fed cutting rates by 25bp increments, rather than the previously-anticipated 50bp rate hike.
6. Lawmakers Eye Banking Rules
Rep. Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, expressed concern over 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. In other words, tighter banking regulation may be on the horizon.
7. Banks to the Rescue
The $30 billion deal for First Republic has been the subject of much speculation. According to the Yahoo Finance team of Dan Fitzpatrick and David Hollerith, the deal was put together by 11 rival banks and involved an uninsured deposit injection into the company.
Despite the challenges facing the financial services industry, it appears that banks may be stepping up to assist their peers. However, tighter regulation may be necessary to prevent similar situations from happening in the future.
Brian Sozzi is Executive Editor at Yahoo Finance. To read more market news, follow Sozzi on Twitter @BrianSozzi and LinkedIn, or download the Yahoo Finance App.