Swiss shotgun wedding – What’s next?

Last Sunday, UBS agreed to buy domestic competitor Credit Suisse in a government-brokered all-share deal for USD3.25bn – the largest bank merger since the global financial crisis. The combined entity will have a balance sheet of USD1.7trn, making it one of the top 10 global banks (and comparable in size to Santander (Spain), Wells Fargo (US) or Barclays (UK)).

Centrifugal emerging markets

Crisis after crisis, emerging market economies (EMs) have been questioning a global financial system dominated by advanced economies and anchored to the US financial cycle.

Mind the gap: the USD30trn global liquidity gap is here to stay as payment behaviours likely to deteriorate in 2023

Global Working Capital Requirements (WCR) for listed companies increased by +9 days to 72 days of turnover in 2022 – the largest annual increase since 2008. Day Sales Outstanding (DSO) and Days Inventories Outstanding (DIO) equally contributed to the annual rise in WCR. In a context of slowing economic activity, oversupply in manufacturing sectors and tightening financial conditions, inventories are likely to decrease while payment delays should increase as in previous economic downturns.

US bank failures—What’s next?

The SVB failure was caused by poor risk management choices but also highlights banks’ general macro-financial challenges from restrictive monetary policy, which essentially removes diversification. 

Inside corporate earnings

Despite a general business deterioration in Q4, 2022 was a strong year overall for corporate earnings. Global revenues jumped by +11.7% y/y and earnings per share (EPS) by +4.3% y/y. 15 out of 23 sectors reported growth for both revenues and EPS, with oil & gas, transportation and hospitality being the biggest winners of the year.

Easy come, easy go

Since 2014, asset purchases and targeted longer-term refinancing operations (TLTROs) have been the two main planks of quantitative easing (QE) in the Eurozone. The ECB’s asset purchases led to a significant compression of term spreads, easing financing conditions in the effort to lift inflation to the price stability target. 

International Women’s Day: Employ and pay them more!

In the EU, women get paid 13% less than men in terms of average gross hourly earnings. Although this is smaller than the global gender pay gap (20% according to the ILO), it does not necessarily reflect more gender equality; for some countries, it merely depicts lower participation rates in paid employment.

The new risk frontier in finance: biodiversity loss

Biodiversity loss is both a risk and an opportunity for the financial sector. Financial institutions may face financial, market, reputational and legal risks when they invest in economic activities that cause adverse effects on biodiversity or are highly dependent on natural capital. 

Russia´s war economy

Despite Western sanctions, the Russian economy held up much better than expected: real GDP contracted by just -2.1% last year. However, the outlook is challenging. We expect a further contraction of -1% this year.