UBS Buys Credit Suisse and Bond Holders get Wiped Out

Good Morning,

Over the weekend UBS bought Credit Suisse for $3.2B in a government brokered deal. The deal comes with $100B in liquidity assistance and $9B guarantee for any potential losses UBS would incur. After the deal $17B worth of Credit Suisse contingent convertible (CoCo) bonds were deemed worthless. With this development some are saying the CoCo market might need to be repriced due to a risk perspective. New York Community Bank assumed Signature Bank deposits.

Brazilian equities ended the last trading day lower due to fear in the market. The Ibovespa laggards were Energisa, Hapvida, Eztec, and Cyrela. Canadian shares ended lower with Royal Bank of Canada shares hitting an 11-week low. Central banks agreed to enhance liquidity in the market is dollar swap line. This would help stave off a global market crisis but investors are still worried starting the trading week with the upcoming FOMC meeting this week.

Markets: Before the Open

Options Corner

Top News Stories

• TMX Group will appoint Luc Bertrand as the chair of the company’s board on May 2 (BNN)

• HEXO Corp’s CEO says he is seeing a price war in Canada’s cannabis industry (BNN)

• Canadian Pacific and Kansas City Southern will merge April14, the deal is worth around C$27B (BNN)

• UBS buys Credit Suisse for $3.2 billion (CNBC)

• Credit Suisse $17B of bonds are deemed worthless (BBG)

• New York Community Bancorp is looking to buy failed Signature Bank assets (BBG)

• Bank of Mexico’s Governor Victoria Rodriguez last Friday said they don’t see contagion from the banking crunch in the U.S. (RT)

• IDB & Banco de Bogota announced a $230M sustainability bond issuance (RT)

• Brazil’s Ministry of Finance cut its estimates for the country’s 2023 GDP growth, due to a high interest rate environment (RT)

• Finnish company UPM is waiting for the green light to start operations at their new pulp mill in Uruguay, total investment is $3.47B (RIO)

• In 2022 Brazil produced a record 48 billion eggs for consumption (RIO)

• Colombian bank Corficolombiana announced a $1.4B pesos ($289K) spending initiative focusing on social development in the country (ELT)

• In mid 2023 the Bolivian government will take charge of the administration of public pensions (ELC)

Insights

Banco Popular (Nasdaq: BPOP) is the largest bank on the island of Puerto Rico. Founded in 1893 by the Carrion family, it now offers multiple banking services on the island, US Virgin Islands, and the U.S. mainland. Even with the negative effects of the pandemic Banco Popular recorded a record net interest income of $1.1 billion. It’s largest loan focus is on commercial real estate representing 49% of loan held on their books. The bank has a 15.84% stake in BHD León bank in the Dominican Republic (as of 2021). Other notable events were the sale of its stake in EVERTEC for $257.7M & the acquisition of K2 Capital Group LLC (in 2021). Overall the bank is in solid footing but after the banking crunch that is developing in the market, the stock is down 22% year to date.

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