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IBERIAN DAILY 16 MARCH (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKING SECTOR, LAR ESPAÑA, MEDIASET ESPAÑA, METROVACESA.

Sharp increase in volatility
Fears of a new banking liquidity crisis in Europe triggered another session of flight from risk assets. Losses were as high as -30% over the session, after A. Lehman, chairman of Crédit Suisse, ruled out requesting state aid, although later on the bank did request signs of support from the SNMB (Swiss Monetary Authority) and FINMA (Swiss Financial Market Supervisor) which will mean liquidity lines the bank will have access to totalling 50 Bn Swiss francs. Thus, within the Euro STOXX, all sectors posted big drops, led by Banks and Energy, whereas defensive sectors such as Household Goods and Telecoms were the best relative performers. On the macro side, in the Euro zone, the industrial output rallied more than expected in January. On another note, the EU would be speeding up regulations for failing banks and taking further steps towards banking union. In the US, February’s production prices contracted unexpectedly, thus reducing inflationary pressure somewhat. The Empire index contracted far above expectations, whereas the NAHB real estate confidence index rose unexpectedly. Lastly, February’s retail sales contracted as expected, although excluding the most volatile components, they stagnated, hinting at flat private consumption growth in 1Q’23. In Japan, January’s final industrial output was cut to -3.8% YoY. In China, housing prices fell at a slower pace.
What we expect for today
The European stock markets would open with gains of up to 2.0%, with banks recovering following the announcement of the liquidity measures that will be provided by the Swiss Central Bank to Crédit Suisse, but with cyclical sectors awaiting the ECB’s decision.
Currently, S&P futures are up +0.34% (the S&P 500 ended +1.3% higher vs. the European closing bell). Volatility in the US rose (VIX 26.14). Asian markets are falling (China’s CSI 300 -1.26% and Japan’s Nikkei -0.8%).
Today we highlight the ECB meeting. In the US we will learn weekly jobless claims, housing starts and building permits for February, as well as March’s Philadelphia Fed index. In debt auctions: Spain (€ 6.5 Bn in bonds due 2028, 2033 and 2032).


COMPANY NEWS

BANKING SECTOR
Last night the Swiss National Bank (SNB) along with Finma, the Swiss Financial Market Supervisory Body, announced jointly that they would support Credit Suisse (CS), providing it with the necessary liquidity. This ended up leading the bank to issue a statement explaining that it will access this 50 Bn CHF (~10% of its total assets) in a preventative manner through a credit line and a short-term liquidity line backed by high-quality assets. SNB has stated that the bank meets the necessary capital (14.1% CET1) and liquidity requirements (LCR 144%), with a loan portfolio that is 90% guaranteed, and 60% in Switzerland. CS has indictaed that it will buy back senior debt totalling some € 3 Bn and that it remains focused on the viability of its Strategic Plan, announced on 27 October’22, to radically restructure investment banking, get rid of securitised products (in which it has already reduced exposure -70%) as well as cost reduction (around -2.5 Bn CHF in 2025, of which around -1.2 Bn CHF would come in 2023).
Separately, the ECB would have requested that the banks under its supervision quantify their exposure to CS, and according to the press, for Spanish banks this exposure would be irrelevant.
MARKET IMPACT
Positive news that should contain the punishment on CS share price (it slid by around -25% yesterday) and therefore on the rest of the banks (-8.4% for the European banking index). Although the uncertainty on the sector will continue, these measures are powerful enough to restore confidence in the bank and the reduce the stress on bank share prices. For the time being the impact remains limited to the Swiss bank, which had already announced its significant liquidity problems.