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Mar 24, 2023

The week in investor relations: Credit Suisse takeover race, UK investors’ concerns rise over US T+1 moves and hundreds of funds risk losing ESG ratings

Our pick of the IR stories from around the web you might have missed this week

– According to Reuters (paywall), the Swiss authorities and UBS Group are racing to close the takeover of Credit Suisse Group within as little as a month to try to retain the lender’s clients and employees. But combining Credit Suisse into UBS could take much longer, potentially months, because the deal needs approval from regulators in tens of countries, Reuters’ sources said, seeking anonymity given the sensitivity of the matter.

‘UBS has made a full commitment to the takeover of Credit Suisse. Now it is extremely important that both parties do everything possible [for] the takeover [to] be successful,’ said Thomas Jordan, Swiss National Bank chairman, earlier this week, adding the next two weeks would be crucial. ‘This is absolutely necessary and we [have] all the commitments from both parties that they will do everything for this takeover to be successful.’

Finextra reported that as the US prepares to shorten the settlement cycle, market participants in the UK are expressing concern about potential operational, technological and cost hurdles. Last month, the US finalized rule changes to cut the settlement cycle to one business day to reduce risks in the clearance and settlement of securities. With the move to T+1 in North America, firms outside the region face pressures to co-ordinate across their global operations. As participants noted, some US firms have already made moves to accommodate time zone challenges. But mid-tier and smaller internationally focused firms are concerned about losing business if they cannot quickly accommodate the changes.

– Hundreds of funds are about to be stripped of their ESG ratings and thousands more will be downgraded in a shake-up being pushed through by index provider MSCI, noted the Financial Times (paywall) in a report. The impact could be particularly acute in Europe, where a growing number of institutions will invest only in funds that are deemed to be compliant with ESG-investing principles. In 2022, ESG ETFs accounted for 65 percent of inflows into European ETFs, according to Morningstar. MSCI, which has $13.5 tn of assets benchmarked against its indices, is yet to publish the results of a consultation on its ESG ratings. But according to unpublished research by BlackRock’s iShares, the world’s largest ETF provider, the number of European ETFs with a triple-A ESG rating from MSCI is set to tumble from 1,120 to just 54, while the number with no rating will surge from 24 to 462.

– In the Middle East, Gulf News reported that Al Ansari Financial Services increased the size of the retail component of its IPO to 7.5 percent from 5 percent, given the scale of demand the offer generated. The retail subscription for the IPO closed on March 23, while the qualified investors tranche ends this week. The overall float size remains at 10 percent, which means the stake sale for qualified investors was reduced. There had been talk among analysts about the possible rejigging of the stake mix for retail and qualified investors. They said retail subscriber interest was heavy from the moment the IPO opened, but there were heavy distractions from the global markets about the Credit Suisse turmoil playing right through.

– In crypto news, Bloomberg (paywall) reported that Coinbase Global received a notice from the SEC formally declaring the securities regulator’s plans to bring an enforcement action against the largest US crypto exchange. This is the latest development in a long-running dispute between the regulator and the digital-asset company. The stock slumped as much as 14 percent in premarket trading this week. SEC chair Gary Gensler has repeatedly said many of the tokens and products offered by crypto companies are securities and that the trading platforms need to register with his agency. Those warnings ramped up after the collapse of several prominent companies last year, including Sam Bankman-Fried’s FTX, which left investors facing billions of dollars of losses.

– According to Forbes, Bitcoin’s share price has gained almost 50 percent since early March, helping the Ethereum price and other cryptocurrencies to rally. This is due to rising expectations the Fed will pivot from its hawkish stance in the face of slowing inflation and bank collapses.

Tesla billionaire Elon Musk waded into the debate, sending a warning to US President Joe Biden after the Fed raised interest rates again. ‘The banks are melting,’ Musk replied to a Twitter post by Biden that referenced his administration’s climate change achievements over his first year in office. Three US banks – Silicon Valley Bank, Signature Bank and Silvergate Bank – all collapsed this month, partly due to interest rate rises wiping out the value of the bonds they held.

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