Credit Suisse (CS) Falls 6% on 'Unacceptable Loss' as Exposure to Archegos Grew to More Than $20 Billion, Set to Raise Over $2 Billion to Support Liquidity

April 22, 2021 6:13 AM EDT
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Shares of Credit Suisse (NYSE: CS) are down over 6% in today’s trading session in Switzerland after the investment bank reported a loss of CHF252 million ($275 million) for the first quarter.

The total Archegos charge for the first quarter stands at CHF4.4 billion ($4.8 billion), the company said in today’s press release. It has 97% of its trading positions relating to the Archegos hedge fund.

Moreover, the Swiss bank said it expects to take an additional hit of about CHF600 million ($655.8 million) for the April-June quarter, it said in today’s statement. Other than the Archegos-related hit, the bank said its Q1 performance was “strong, supported by solid results in Switzerland, and strong growth in APAC and investment banking.”

“Our results for the first quarter of 2021 have been significantly impacted by a CHF 4.4 bn charge related to a US-based hedge fund. The loss we report this quarter, because of this matter, is unacceptable. Together with the Board of Directors, we have taken significant steps to address this situation as well as the supply chain finance funds matter,” Thomas Gottstein, Chief Executive Officer of Credit Suisse Group AG, said.

“Among other decisive actions, we have made changes in our senior business and control functions; we have enhanced our risk review across the bank; we have launched independent investigations into these matters by external advisors, supervised by a special committee of the Board; and we have taken several capital-related actions. We will work to ensure Credit Suisse emerges stronger.”

The bank also announced it will raise more than $2 billion to strengthen its balance sheet as it recovers from the Archegos scandal, which forced the investment bank CEO Brian Chin and chief risk and compliance officer, Lara Warner, to step down.

“We expect that our successful MCN placement today will further strengthen our balance sheet and enable us to support the momentum in our core franchises. Our underlying result is a testament to the earnings power of Credit Suisse and to the commitment of our employees. And it makes it all the more important that we quickly and decisively resolve the issues we are currently dealing with,” Gottstein added.

The Wall Street Journal said that the Swiss bank amassed more than $20 billion of exposure to investments related to Archegos and it struggled to monitor all investments before the hedge fund liquidated.

Without the Archegos scandal, CS would have reported revenue of CHF7.4 billion to mark a 35% surge on a year-to-year basis.

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