Archegos Capital Management’s massive blowup cost Credit Suisse $4.7 billion, the Swiss bank revealed Tuesday as it pushed out two top executives in the scandal’s wake.
Credit Suisse said it expects to post a roughly $959 million loss for the first quarter following the giant margin call that forced Archegos — the family investment office run by hedge-fund veteran Bill Hwang — to reportedly sell more than $20 billion worth of stock.
That loss includes a nearly $4.7 billion charge the bank expects to take “in respect of the failure by a US-based hedge fund to meet its margin commitments,” Credit Suisse said without identifying Archegos by name.
The Zurich-based giant said Brian Chin, the CEO of its investment bank, and Lara Warner, its chief risk and compliance officer, would step down Tuesday while its board of directors investigates the Archegos mess.
“The significant loss in our Prime Services business relating to the failure of a US-based hedge fund is unacceptable,” Credit Suisse CEO Thomas Gottstein said in a statement. “Serious lessons will be learned.”
Credit Suisse was reportedly hit the hardest when Archegos’ debt-heavy trading bets went south, forcing banks to whom the firm owed money to sell massive amounts of shares when it couldn’t meet their demands for collateral.
While some of Archegos’ trading partners — such as Goldman Sachs, Deutsche Bank and Wells Fargo — were able to avoid large losses by selling the shares quickly, Credit Suisse’s efforts to unload the firm’s holdings stretched into this week, according to reports.
The bank dumped $2.3 billion worth of Archegos-linked shares in ViacomCBS, fashion retailer Farfetch and Chinese e-commerce firm Vipshop on Monday, Bloomberg News reported.
The Archegos disaster will “negate the very strong performance” that Credit Suisse’s investment banking businesses otherwise posted for the first three months of the year as well as the increased profits across the bank’s three wealth management businesses, it said in a Tuesday trading update.
Credit Suisse is also grappling with a separate scandal over its ties to Greensill Capital, the British financial-services firm that collapsed last month. The bank’s losses from the Greensill and Archegos messes could total $7.5 billion, JPMorgan Chase analysts estimate.
Japanese bank Nomura warned shareholders last week that it could take a hit from $2 billion it was owed by an American client, which was reportedly identified as Archegos.
Credit Suisse’s US-listed shares were flat at $10.87 in premarket trading as of 7:27 a.m. Tuesday.
With Post wires