The Archegos crash weighs down Credit Suisse’s accounts, here’s why
Credit Suisse closes the second quarter with a 78% drop in earnings: net profit attributable to shareholders is 253 million francs. The decline was affected by the Archegos case and the losses caused by the American fund. All the details
THE ACCOUNTS OF CREDIT SUISSE
Credit Suisse closes the second quarter with a 78% drop in earnings: net profit attributable to shareholders is 253 million francs. He makes it known as a group in a note. The decline was affected by the Archegos case and the losses caused by the American hedge fund.
THE WEIGHT OF ARCHEGOS
Credit Suisse suffered the heaviest decline among the leading stocks on the Swiss list after the announcement of the half-year accounts that see the net profit drastically reduced by the involvement in the Archegos and Greensill crashes.
WHAT HAPPENS ON THE STOCK EXCHANGE AT CREDIT SUISSE
In the middle of the morning, the share price of the second Swiss bank recorded a drop of 3.9% to 8.93 francs, while the SMI index was almost unchanged (-0.02%).
THE NUMBERS OF CREDIT SUISSE
Credit Suisse reported net income of 253 million francs (around 235 million euros) in the second quarter of 2021, down by 78% compared to 1.16 billion in the same period of 2020 and well below the forecasts of the analysts aiming at 334 million on average. The half year ended with a net result of only one million against 2.47 billion in the first half of last year. Excluding the Archegos affair and other factors, the Cs specifies the adjusted second quarter profit amounted to 1.3 billion, down 11%.
LOSSES RELATED TO ARCHEGOS
The losses linked tothe US fund of the controversial financier Bill Hwang , which collapsed in March, in the second quarter amounted to 594 million francs, which added to the 4.4 billion of the first, bring the total impact to 5 billion in the half year. The sector most affected by the scandal was that of Investment Banking, which suffered a pre-tax loss of 653 million dollars (594 million francs), with revenues down 41% to 1.8 billion dollars.
THE COMMENT OF THE CEO OF CREDIT SUISSE
"Credit Suisse's operating results in the second quarter have held up well and the capital ratios are very good, because we benefit from the decisive measures taken to meet the challenges posed by the dossiers linked to Archgos and Greensill's funds", commented the CEO. Thomas Gottstein, stressing that the bank "is taking the two events very seriously and is determined to draw all the lessons they need."
THE INITIATIVES
The group pulled out of all remaining positions on Archegos in early June and took "relevant human resource initiatives, including layoffs and monetary penalties."
THE INVESTIGATION
Credit Suisse today also published the results of an internal investigation into the Archegos case carried out by the law firm Paul, Weiss, Rifkind, Wharton & Garrison and its experts, based on more than 80 interviews with current or former employees of the group, as well as on the collection of over 10 million documents or other data.
THE EFFECTS OF ARCHEGOS ON CREDIT SUISSE
Credit Suisse's gigantic $ 5.5 billion loss from its exposure to Archegos is attributable to the "individual responsibility" of 23 individuals, who ignored the warning signs associated with Bill Hwang's hedge fund betting on American stock market, without however acting maliciously or in bad faith, emerged from the independent external investigation commissioned to Paul, Weiss, Rifkind, Wharton & Garrison, which Credit Suisse reports on in a note.
THE DISMISSALS
To pay for the inability of one of the world's banking giants to control its risks in 'prime brokerage' services were 23 employees, of which 9 were laid off, who were given "severe monetary penalties" for a total of about 70 millions of dollars, through the cancellation of bonuses and the return of compensation received.
WHAT EMERGES FROM THE INVESTIGATION
The investigation found weaknesses in risk management in the investment bank's Prime Services sector in both the first and second lines of defense, as well as shortcomings regarding risk intensification. In the same sector, deficiencies were found in the control of exceeding limits in both lines of defense due to insufficient fulfillment of supervisory responsibilities ”.
THE NOTE FROM CREDIT SUISSE
However, the CS underlines, "the investigations also ascertained that there was no situation in which the business and staff were involved in fraudulent or illegal conduct or that we acted with malicious intent".
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/ecco-come-il-crack-archegos-zavorra-i-conti-di-credit-suisse/ on Thu, 29 Jul 2021 13:16:51 +0000.