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Archegos Capital bankruptcy: Credit Suisse has to write off CHF 4.4 billion

2021-04-06T07:46:29.620Z


The collapse of the US hedge fund Archegos Capital puts the major Swiss bank Credit Suisse in dire straits. The first quarter ended with a drastic loss, two top managers had to leave.


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Credit Suisse headquarters in Zurich: "Unacceptable" loss

Photo: ARND WIEGMANN / REUTERS

The collapse of the US hedge fund Archegos Capital has cost Credit Suisse dearly.

The major Swiss bank posted a charge of CHF 4.4 billion in this context, as Credit Suisse announced on Tuesday.

For the first quarter, the institute announced a pre-tax loss of around CHF 900 million.

The institute is suspending the share buyback program with a volume of at least one billion francs and is cutting the dividend planned for 2020.

Risk boss Lara Warner and investment banking boss Brian Chin are leaving the institute.

"The substantial loss in our prime services business in connection with the collapsed US hedge fund is unacceptable," said CEO Thomas Gottstein.

"We will learn our lessons from these matters." The rest of the investment banking as well as the wealth management business had developed well in the first quarter.

Credit Suisse has collected new money from customers.

The core capital ratio should be at least twelve percent for the first quarter and thus exceed the regulatory requirements.

Nevertheless, the Archegos collapse is another serious setback for CEO Thomas Gottstein, who, after years of renovation and clean-up work, had actually declared a growth phase for 2021.

For Credit Suisse, Archegos is already the second debacle within a few weeks.

At the beginning of March, the institute initiated the winding up of four supply chain financing funds operated together with Greensill Capital with a total volume of around ten billion dollars.

It is still unclear how much money the liquidation of the funds will generate.

According to insiders, the major Swiss bank is looking to compensate investors for possible losses out of their own pockets.

The problem at Archegos Capital was triggered by the slump in the price of the media group ViacomCBS, in which the fund had a large stake.

Because Archegos failed to meet the banks' demands for more collateral, they sold securities on a large scale to get their money in, people familiar with the process reported.

The US houses Goldman Sachs and Morgan Stanley as well as Deutsche Bank sold stocks worth billions of dollars.

By the time Credit Suisse and Japan's Nomura decided to sell too, stocks had fallen too far to avert major losses.

As a consequence, the management should lose their bonuses, board chairman Urs Rohner waived 1.5 million francs of his salary.

Chin is giving up his assignment on April 30th, Warner is stepping down with immediate effect.

Christian Meissner will be the new head of the investment bank.

The former head of investment banking at Bank of America has been with Credit Suisse since October.

On an interim basis, Joachim Oechslin will take on the role of Risk Manager, which he already held from 2014 to 2019.

mik / Reuters

Source: spiegel

All business articles on 2021-04-06

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