Syz the moment

This is the biggest-ever quarterly profit for a bank in the second quarter as a result of its emergency takeover of Credit Suisse, and confirmed that it would fully integrate the local business of its former rival by next year. Key takeaways: - UBS said the result primarily reflected $28.93 billion in negative goodwill on the Credit Suisse acquisition (i.e this huge profit is due to a huge one-off gain that reflects how the acquisition costs were far below Credit Suisse's value). Underlying profit before tax, which excludes negative goodwill, integration-related expenses and acquisition costs, came in at $1.1 billion - The accounting gain for the quarter eclipses JPMorgan Chase & Co.’s $14.3 billion profit in the first quarter of 2021, the modern record for US and European lenders; - Analysts had projected a net profit of $12.8 billion for the three months to the end of June, according to a Reuters poll. Source: Bloomberg, CNBC Source illustration: Sonntagzeitung / Melk Thalmann

Total assets $350 billion... Source: FinanceLancelot * What Is the Federal Home Loan Bank System (FHLB)? The Federal Home Loan Bank System (FHLB) is a consortium of 11 regional banks across the U.S. that provide a reliable stream of cash to other banks and lenders to finance housing, infrastructure, economic development, and other individual and community needs. (source: Investopedia)

Yesterday it had its lowest close of 2023, back to the panic levels of mid-March when Silicon Valley Bank failed. Source chart: James Bianco

(cut 1-year rate by 10bps; no change in 5-year while the market was expecting a 15-basis-point cut on both rates) and avoided trimming the reference rate for mortgages, despite the PBOC urging lenders to boost loans. Banks’ failure to follow the central bank suggests they were unprepared, but that cuts to their lending rates may still arrive in the coming months.. Meanwhile, The Hang Seng Index declined as much as 1.8% and was set for its lowest close since November. Shares in mainland China also dropped into a second day, with finance stocks among the worst performers. Source: Bloomberg

One of China’s largest private wealth managers is triggering fresh anxiety about the health of the country’s #shadowbanking industry after missing payments on multiple high-yield products. Zhongrong International Trust Co. missed payments on dozens of products and has no immediate plan to make clients whole, indicating troubles at the embattled Chinese shadow bank are deeper than previously known. Wang Qiang, board secretary of the firm partly owned by financial giant Zhongzhi Enterprise Group Co., told investors in a meeting earlier this week that the firm missed payments on a batch of products on Aug. 8, adding to delays on at least 10 others since late July, according to people familiar with the matter. At least 30 products are now overdue and Zhongrong also halted redemptions on some short-term instruments, one of the people said. Source: bloomberg

UBS on Friday said that it has ended a 9 billion Swiss franc ($10.27 billion) loss protection agreement and a 100 billion Swiss franc publicly liquidity backstop that were put in place by the Swiss government when it took over rival Credit Suisse in March. UBS said the decision followed a “comprehensive assessment” of Credit Suisse’s non-core assets that were covered by the liquidity support measures. Credit Suisse also fully repaid the emergency liquidity assistance loan of 50 billion Swiss francs to the Swiss National Bank in March, as Credit Suisse teetered after a collapse in shareholder and investor confidence. “These measures, which were created under emergency law to preserve financial stability, will thus cease to exist, and the Confederation and taxpayers will no longer bear any risks arising from these guarantees,” the Swiss government said in a statement Friday. “Furthermore, the Confederation earned receipts of around CHF 200 million on the guarantees.”

That took the total amount owed to $1.03 trillion, the highest gross value in Fed data going back to 2003. The increase in the category was the most notable area as total household debt edged higher by about $16 billion to $17.06 trillion, also a fresh record. As card use grew, so did the delinquency rate. The Fed’s measure of credit card debt 30 or more days late rose to 7.2% in the second quarter, up from 6.5% in Q1 and the highest rate since the first quarter of 2012 though close to the long-run normal, central bank officials said. Total debt delinquency edged higher to 3.18% from 3%. Source: CNBC

Deputy PM Salvini announced a 40% levy on extra profits of lenders for 2023 as part of a wide-ranging decree approved at a cabinet meeting. Analysts estimate it will wipe 19% from bank earnings. Levy targets higher interest incomes following rate hikes by ECB. Source: Bloomberg, HolgerZ