Good morning,

Cracks in the global financial system are expected to bring forward the end of interest rate hikes, with Assistant Treasurer Stephen Jones saying the Albanese government was hopeful UBS’s emergency takeover of troubled lender Credit Suisse would calm jitters in the global economy.

After an emergency $4.8bn rescue plan for the trouble-prone Swiss banking giant Credit Suisse amid fears its collapse could trigger another global financial crisis, RBA assistant governor Chris Kent said local financial markets were more volatile but “are still functioning”.

Dr Kent said Australian lenders had no funding issues and could weather even a prolonged period of market strain.

Mr Jones said “we certainly hope” the rescue deal for Credit Suisse would deliver calm to financial markets after a rollercoaster 10 days roiled bank institutions around the world.

UBS chairman Colm Kelleher said it was “a day frankly we hoped would not come”, as he outlined the Credit Suisse takeover after Swiss regulators used emergency powers to “preserve global financial stability”.

The tie-up creates a global wealth manager with $US5 trillion of invested assets, but Mr Kelleher said UBS would “de-risk and downsize” Credit Suisse’s trading operations, putting the bulk in a separate non-core division.  

On the Credit Suisse takeover, sources told The Australian, each UBS business unit would be undertaking a granular assessment of the target’s operations to ascertain which businesses would be retained or ringfenced within the investment bank, which would be partly run down or spun off.  

Credit Suisse’s circa 100 Australian employees received an internal memorandum about the transaction on Monday, but any detailed information was not yet forthcoming about how the deal would play out here. Staff were told they should continue to work as usual and would receive any scheduled bonus payments on March 24. Several global conference calls were slated to occur on Monday and Tuesday.

The Queensland sugar city of Bundaberg, best known for its rich red soil and rum, is now gaining a reputation for something else – a role in bringing down a 166-year-old Swiss bank.

The global banking crisis initially sparked by the failure of Silicon Valley Bank has now engulfed Credit Suisse, the Swiss banking giant that for many years bankrolled the activities of one of Bundaberg’s favourite sons Lex Greensill.

Some banking insiders say Credit Suisse’s problems had their genesis through its exposure to Greensill – who provided supply chain financing that quickly ballooned to a $US10bn exposure for the investment bank. Greensill built a global financial empire from the frustration of seeing his farming parents waiting months to be paid for their crops.

Five things you need to know

• Wall Street is higher as investors welcome UBS-Credit Suisse's forced marriage, await First Republic Bank's rescue and the US Fed's two-day monetary policy meeting kicks off. Amazon is cutting more jobs and geopolitical tensions remain in focus as Russian president Vladimir Putin and Chinese premier Xi Jinping met in Moscow. Gold is higher and European banks and bond prices fell.   More
• It was a cocktail party at upmarket, Café Sydney, overlooking Circular Quay, in September 2019 when Credit Suisse celebrated its 50 years of operation in Australia. its Australian founder Ross Bradfield recalled executives of the company across the road from the office in Melbourne coming into his “little office to say we are on the verge of a major international acquisition, and we would like your firm to be involved in its financing.” The company was BHP. More
• Local fund managers expressed relief that the bailout of troubled Swiss bank Credit Suisse will stem the immediate panic running through the global financial system, but are also concerned that long term structural weaknesses remain embedded in the sector which could cause a fresh crisis soon. More
• Film director Peter Jackson quipped that the Beatles “secret” conversations were “not drowned out anymore” after he developed a machine learning system to complete the sound restoration of the band’s ‘Get Back’ documentary. Now a partnership between Cochlear, Google and Australian audiology researchers are looking to put similar technology in every hearing aid and implant. More
• Latitude Financial has confirmed a cyber attack, in which almost 330,000 identification documents were stolen, has yet to be shut down with customer passports and Medicare cards among details exposed. More

The Markets

"In investment banking everything comes down to reputation. And after the massive reputational hits and own goals of recent years – mostly around risk failures – Credit Suisse lost the trust of the market"

Read the full story here

DataRoom

Shares in Healius soared 8.3 per cent after Australian Clinical Labs put forward a nil premium merger proposal for the business, but most in the market believe it will have to put more money on the table to get the $2.4bn-plus tie up over the line.

Most see the offer as opportunistic, arguing that the target needs some sort of compensation for the $95m of cost synergies that the Goldman Sachs-advised ACL claims it will achieve, and Healius told shareholders to take no action.

But shareholders like the idea of a deal, as shown by the share price movements, and there has been pressure to embark on a sale from Healius investors on the board, as they grow frustrated about its lack lustre performance.

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Margin Call

Terribly awkward timing for Credit Suisse, with Tuesday marking the opening day of its 26th Asian Investment Conference at the Conrad Hotel in Hong Kong.

A flagship event on the bank’s calendar, this year would have marked its triumphant return to an in-person setting since the Covid-19 pandemic.

Instead, it’s proceeding in the shadow of a weekend rescue and a hastily-arranged marriage with UBS.

Slight revisions to the programming will mean no sight of Credit Suisse chair Axel Lehmann or CEO Ulrich Koerner for the welcome address, as intended, given they’ll be on another continent – in Koerner’s case he’ll be fighting to keep his job.

Officials said on Monday the conference would definitely proceed as planned, albeit with the media no longer invited to attend. “The event will now be exclusive to clients and no longer open to media,” the bank’s officials wrote. That’s depressingly consistent with the world’s perception of Hong Kong at the moment; so much for documenting its revival, eh?

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