Archegos, all the problems of Crédit Suisse

What happened (not only on the stock exchange) for Crédit Suisse with the Archegos case

The deleterious effects of the Archegos case continue for Crédit Suisse.

Crédit Suisse pays for the Archegos affair and yesterday lost almost 6% on the Zurich stock exchange in the wake of the announcement of capital strengthening through convertible bonds involving 203 million new shares, at current values ​​of 1.8 billion francs . The goal is to bring Cet1 to 13% from 12.2%.

Here are all the news.

TONFO ARCHEGOS FOR CREDIT SUISSE

Although the bank paid off 97% of its positions on the American hedge fund, it closed the quarter with a net loss of 252 million francs (from a positive result of 1.3 billion) and a pre-tax redemption of 757 million. (from a profit of 1.2 in the same period last year) for the total impact of 4.4 billion already announced by the bank from the hedge fund, as pointed out by CEO Thomas Gottstein. The board also decided to waive the bonuses for the year 2020, cutting the proposed dividend.

THE INVESTIGATION ON CREDIT SUISSE

Meanwhile, Finma, the Swiss supervisory authority, has opened an investigation into the losses linked to the Archegos case after the Greensill crash in which Credit Suisse had already been damaged.

THE ARCHEGOS CASE

Like Morgan Stanley, Nomura and Goldman Sachs, Credit Suisse had funded the highly leveraged hedge fund's bets that did not go according to the fund's plans. As a result, the banks exposed with the fund forced him to close his investments, in order to limit the losses related to the exposure, but failed to see all the money they had disbursed to the client returned.

WHAT CREDIT SUISSE SAID

As reported by was forced to sell many of its largest positions Wall Street Journal, the Swiss group has accumulated more than 20 billion investment on archegos Capital Management Exposure dollars, but the bank has struggled to monitor them before the bottom. The US investment firm's bets on a group of stocks ballooned just before the collapse in March, but apparently the investment bank's managers had not fully implemented systems to monitor Archegos' rapid growth.

WHAT HAPPENS TO CREDIT SUISSE

CEO Thomas Gottstein and chief risk officer Lara Warner, who recently left the bank, learned of the exposure to Archegos only in the days leading up to the fund's forced liquidation, the WSJ wrote. Archegos, an investment firm founded by former Tiger Asia manager Bill Hwang, had made huge bets on some stocks with money borrowed from banks. When some large positions reversed and Archegos was unable to meet margin calls, one of the largest sudden losses in Wall Street history was triggered.

THE EFFECTS OF ARCHEGOS NOT ONLY ON CREDIT SUISSE

Archegos has spread its bets on half a dozen banks, including Nomura Holdings and Morgan Stanley, who have also reported huge losses. Credit Suisse lent Archegos more in relation to its size than other financial institutions and was one of the last to exit the investment with heavier consequences.

According to the WSJ , some managers inside the bank, aware of the exposure on Archegos, had thought it was a fraction of the 20 billion dollars. "Credit Suisse was unable to protect itself from its exposure to Archegos also because it did not set up a system that monitored in real time the risk that a position created for the bank as the prices of the underlying securities changed," some sources explained to the newspaper. , as pointed out by Mf . This system, known as dynamic margin, was not fully implemented in the division that oversaw Archegos' investments within Crédit Suisse. The bank had planned to migrate Archegos' positions into that system later in the spring.

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This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/archegos-tutti-i-guai-del-credit-suisse/ on Fri, 23 Apr 2021 07:41:27 +0000.