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Credit Suisse Taps Investors for Cash After Archegos Loss Widens

Credit Suisse said it would issue new shares after losses from Archegos Capital Management wiped out a strong first quarter

4/22/2021 9:15:00 AM

Credit Suisse said it would issue new shares after losses from Archegos Capital Management wiped out a strong first quarter

Credit Suisse said it would issue new shares after losses from Archegos Capital Management wiped out a strong first quarter, highlighting the damage caused by the collapse of the investment firm.

rose 31% to about $8.3 billion from client activity in surging markets. Its loss for the quarter was 252 million Swiss francs, or about $275 million.Revenue at Credit Suisse’s investment bank was up 80%, buoyed by corporate deal making and selling stock and bonds. Credit Suisse said its wealth management businesses, which doesn’t report as a single division, brought in about $4.23 billion in revenue, up 3% from a year earlier.

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Credit Suisse has been the hardest hit of the lenders to Archegos, a U.S. family investment firm that took huge bets on a few stocks with borrowed money. Other banks lost money as well when Archegos couldn’t meet margin calls, but they were able to exit positions more quickly.

The fund’s problemscame just weeks after Credit Suisse warned losses could be material from the collapse of another bank client, Greensill Capital, with which Credit Suisse ran a $10 billion set of investment funds.Finma also said it opened enforcement proceedings into the Greensill funds. Credit Suisse said it marked down a loan owed by Greensill, but signaled it doesn’t plan to compensate investors who placed their money in the funds.

“We have not indemnified the investors in these funds. These are third-party investors,” David Mathers, Credit Suisse’s chief financial officer said Thursday.The double blow of Archegos and Greensill represents the bank’s biggest test in years and comes at a time of a leadership transition. Thomas Gottstein took over a year ago after his predecessor, Tidjane Thiam, was forced out after

the bank was caught spyingon a recently departed executive.The bank’s longtime chairman, Urs Rohner, will retire after an annual shareholder meeting next week. He will be replaced with an outsider,Lloyds Banking GroupPLC Chief Executive António Horta-Osório.

On Thursday, Mr. Gottstein said the Archegos loss was unacceptable. The bank cut its dividend and pushed out its heads of risk, investment banking and equities. Its board and regulators are looking into what went wrong.Credit Suisse said it is strengthening risk controls in the prime brokerage unit that serviced Archegos, adding that it expects to reduce the size of its business serving hedge funds.

Credit Suisse stock has sunk 29% since the end of February because of its problems and a weakening capital position. It said a main measure of resilience, its common equity Tier 1 capital ratio, slipped to 12.2% from 12.9% at the end of December. On Thursday, it said it is placing about 203 million new shares with investors through convertible notes to lift the ratio back toward 13%.

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Roots of all evil: BarackObama & JoeBiden DoddFranckAct deregulating FamilyOffices. At least 6000 Billion $ are completely unregulated: No SEC. No Investor protection. 'please pay for our mistakes' - credit suisse