Home Business UBS gains $29 billion thanks to ill will linked to Credit Suisse deal

UBS gains $29 billion thanks to ill will linked to Credit Suisse deal

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UBS gains $29 billion thanks to ill will linked to Credit Suisse deal

When UBS agreed to buy archrival Credit Suisse for just over $3 billion this spring at the behest of the Swiss government, analysts and investors said the price represented a steep discount. UBS’s latest financial results reflect the extent of theft.

Today, the bank reported a $29 billion (yes, you read that right) profit for the second quarter, the biggest quarterly profit in banking history. But that paper gain belies the challenges UBS faces as it tries to complete the biggest bank acquisition since the 2008 financial crisis.

UBS’s huge profits arise from “bad will” an accounting phenomenon in which a company purchases an asset for less than its value, resulting in a non-monetary gain that essentially recognizes the asset’s true value. (Also known as “negative goodwill.”) UBS reported that its underlying profit for the quarter was just $1.1 billion.

A wave of bank bailout deals this year has generated higher gains for acquirers. Second-quarter profit at JPMorgan Chase rose 67 percent largely due to its acquisition of First Republic, while First Citizens enjoyed a 3,500 percent gain in first-quarter earnings after buying Silicon Valley Bank at a deep discount.

But UBS has more work to do, and the bank estimates the Credit Suisse acquisition will be largely complete by 2026. Among its biggest tasks is consolidating its former rival’s national bank with its own, despite concerns the move would undermine competition in the Swiss retail banking.

Uniting both will cause the loss of some 3,000 jobs in the country, which will satisfy the fears of politicians and voters. But today UBS defended its decision saying: “Our analysis clearly shows that full integration is the best outcome for UBS, our stakeholders and the Swiss economy.”

Meanwhile, Credit Suisse’s own results – including a pre-tax loss of 4.3 billion Swiss francs ($4.9 billion) in the quarter, linked to client withdrawals and investment banking difficulties – suggest that UBS still has major hurdles to overcome to absorb the business.

For now, UBS shareholders seem content. especially with the disreputable gain showing how much the bank benefited from bailing out its rival. (UBS manages around $5 trillion in client assets after the deal.) The bank’s shares rose more than 5 percent today to 23.42 Swiss francs ($26.57) and are now trading at their highest level since the summer of 2008.


Senator Mitch McConnell freezes again in a public appearance. During a question and answer session. In a session with reporters in Kentucky yesterday, the Senate’s top Republican stopped speaking in mid-response for about 30 seconds. It was the second such incident in two months and renewed questions about the 81-year-old McConnell’s health and his ability to continue serving his term.

Donald Trump is accused of grossly overinflating his property values. New York Attorney General Letitia James said in a court filing that the former president fraudulently increased the value of his properties for years, increasing his net worth by as much as $2.2 billion. Trump’s lawyers said the case, one of many he is facing in federal and state courts, should be dismissed.

Microsoft takes steps to separate its Teams app in Europe. The tech giant hopes that offering lower-cost versions of its productivity software packages that do not include the communications program will reassure EU regulators who launched an antitrust probe into the matter last month. It’s unclear if that will be enough: a European Commission spokeswoman declined to comment on whether the move met regulators’ concerns.

Regulators are reportedly looking into the benefits that Tesla gave to Elon Musk. Federal prosecutors in Manhattan and SEC officials are examining benefits, including a spacious glass house in Texas described within the company as a home for its chief executive, according to The Wall Street Journal. The investigations, which appear to focus on whether the benefits provided by the company were properly disclosed to investors, are the latest legal headache for Tesla.

The S&P 500 is on a four-day winning streak on hopes that the Federal Reserve is done raising interest rates. That optimistic view will be put to the test tomorrow morning when the Labor Department releases its Nonfarm Payrolls report for August.

Economists polled by Reuters estimate that employers added 170,000 jobs in August, which would be the smallest monthly increase since December 2020. But investors would likely welcome a modest slowdown, along with evidence that wages are tightening. moderating.

For much of the year, markets have reacted positively to any data showing that the Federal Reserve’s policy of raising its prime rate was cooling the hot labor market and, in turn, helping to reduce inflation.

The labor data already published this week have encouraged investors. from yesterday ADP’s private payrolls report for August showed the slowest job growth in five months. This followed the release of data from the Labor Department on Tuesday that revealed a sharp drop in job openings. “The job market is cooling off and taking pressure off policymakers worried about a second wave of inflation,” Jeffrey Roach, chief economist at LPL Financial, a research firm, wrote yesterday in a note, pointing to the ADP data.

The Federal Reserve is expected to hold rates steady at its meeting next month.. And yesterday the futures market was pricing in a 44 percent chance that the Federal Reserve would raise rates at its November policy meeting, a sharp drop from the 67 percent chance that traders were pricing in at the start of week. Jay Powell, chairman of the Federal Reserve, warned last week that central bankers don’t think their fight against inflation is over yet, making Friday’s jobs numbers critical.

  • In other labor news, the Biden administration yesterday proposed an increase in the limit for salaried workers who can receive overtime, making millions more workers eligible for time-and-a-half pay if they work more than 40 hours a week. .


steve schwarzman, co-founder of Blackstone, speaking with Puck about the possibility of a rematch between Biden and Trump in 2024 despite both candidates faring poorly with voters. Schwarzman, a major Republican donor who has turned his back on trumphe said another candidate could still claim the Republican nomination.


Hurricane Idalia has been downgraded to a tropical storm and is moving north after battering Florida, leaving residents counting the costs of the devastation and the insurance industry predicting billions of dollars in claims. But the storm’s impact also sheds light on the complicated relationship between Gov. Ron DeSantis, a Republican presidential candidate, and the federal government, which typically spends heavily to aid such cleanups.

The Biden administration has pledged support. The Federal Emergency Management Agency has about $3.4 billion in its disaster relief fund to deal with the aftermath of the Maui and Idalia wildfires. Deanne Criswell, the agency’s director, told reporters yesterday that DeSantis had “no unmet needs” before heading to Florida. President Biden said he had called DeSantis to tell him that he had approved an emergency declaration that the governor requested, adding: “I think he trusts my judgment and my desire to help.”

But DeSantis hasn’t always backed spending federal funds for disaster relief. When he was a congressman in 2013, he refused assistance to the victims of Hurricane Sandy in New York. However, as governor of Florida, he sought help, and during Hurricane Ian last year, he ended his political dispute with Biden. DeSantis also condemned FEMA for denying a request for funds to rebuild homes after Ian.

DeSantis is already turning down federal funds in other ways. Florida is entitled to about $350 million in green incentives under the Cut Inflation Act, but the governor has turned down the money. The Republican governors of South Dakota and Iowa, along with the Democratic governor of Kentucky, are rejecting smaller sums.

But DeSantis’ broader pushback suggests that taking a stand on IRA money could become a talking point in the race to decide the Republican presidential nominee. And that could ultimately undermine President Biden’s efforts to advance his environmental policies in the 2024 election campaign, as climate change makes emergencies like the one in Idalia increasingly common.


Offers

  • Reid Hoffman, co-founder of LinkedIn, will reduce his role in seeking new investment in Greylock Ventures to spend more time on AI efforts. (WSJ)

  • Dan Och, co-founder of hedge fund Sculptor, is fighting its planned sale to Rithm Capital, widening a confusing dispute over the fate of the once-giant fund. (FOOT)

  • Billionaire Thomas Tull is reportedly looking to increase his stake in the NFL’s Pittsburgh Steelers. (Bloomberg)

Policy

  • The Federal Reserve has reportedly raised risk and compliance concerns about a division of Goldman Sachs’ work with fintech companies. (FOOT)

  • “How Jeffrey Epstein tried to access the Trump circle” (WSJ)

  • A federal judge has rejected an offer by Trevor Milton, founder of electric vehicle maker Nikola, for a new trial on fraud charges, dismissing claims that a jury was secretly biased against the wealthy. (Reuters)

the best of the rest

  • New documents purport to show how Adani family associates used opaque funds to secretly accumulate stakes in the billionaire Adani conglomerate. (FOOT)

  • Laszlo Birinyi, the financier who made a fortune with an investment approach centered on market “psychology”, died on August 21. He was 79 years old. (NYT)

  • How billionaires including Sumner Redstone, Sam Zell and the founders of Carlyle are said to have been defrauded out of millions by a man already behind bars. (New Yorker)

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