MILANO – The collapse of the Archegos fund on Wall Street presents a higher-than-expected bill to Credit Suisse, which presented its first quarter accounts (252 million Swiss francs red), announcing an additional 600 million in provisions, with 97% of the positions having been closed. For Archegos, Credit Suisse had carried out in the first quarter provisions of 4.4 billion.
The bank was also involved in the collapse of the financial company Greensill capital and had to cut dividends, suspend the buybacks of own shares and start an internal audit on these files. The bank has announced the departure of the head of investment banking and risk management. In the first quarter of last year, Credit Suisse posted a net profit of 1.3 billion Swiss francs.
To plug the holes opened by the US crash, the bank has launched the issue of two notes convertible into shares worth almost 2 billion francs.
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.
Credit Suisse justified the loss incurred in the first quarter precisely with the exposure to the Archegos fund, stating that the result reflects “a significant burden, linked to an issue related to the US hedge fund that occurred in the first quarter of 2021, and which offset (the bank’s) positive performance in the wealth management and investment banking sectors. ” The Archegos fund exposure scandal resulted in the resignation of Credit Suisse’s head of investment bank division Brain Chin and the bank’s risk manager, Lara Warner.
The board also decided to waive the bonuses for the year 2020, cutting the proposed dividend. According to what the Wall Street Journal, the American and Swiss authorities asked Credit Suisse for more information on the links with the Archegos fund.
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