Comments
Banks roiled by the Archegos Capital fallout may see total losses in the range of $5 billion to $10 billion, according to JPMorgan.
Losses from trades unwinding related to Archegos will be “very material” in relation to lending exposure for a business that is mark-to-market and holds liquid collateral, analysts led by Kian Abouhossein wrote in a note. They added that Nomura Holdings Inc’s indication of potentially losing $2 billion and press speculation of a $3 billion to $4 billion loss at Credit Suisse AG is “not an unlikely outcome.”
Analysts and investors are trying to figure out the final losses to banks exposed to the Archegos implosion, with the task made harder by the opaque nature of the leveraged trading involved. JPMorgan had previously estimated losses in the range of $2 billion to $5 billion.
“We are still puzzled why Credit Suisse and Nomura have been unable to unwind all their positions at this point,” the analysts wrote, adding that they expect to see full disclosures from lenders by the end of this week.
Credit Suisse Girds for Billions in Losses From Archegos Hit
The analysts advised investors to keep an eye on credit agencies statements as they expect poor risk management to be an issue.
That’s an emerging theme at Credit Suisse, where executives are expecting the loss related to Archego to run into the billions, according to people with knowledge of the matter. March’s blowups may wipe out more than a year of profits for the bank and threaten its stock buyback plans, as well as adding to the reputational hit from other missteps.
The bank’s plans to buy back 1.5 billion Swiss francs ($1.6 billion) of shares are at risk, according to Berenberg analyst Eoin Mullany. He estimates the lender could face losses of $3 billion to $4 billion.
“The hits just keep coming for Credit Suisse,” he wrote in a note Mullany.
Preceding the Archegos losses were the liquidation of its supply-chain finance funds linked to collapsed financier Lex Greensill and a writedown on a stake in hedge fund York Capital Management taken in the fourth quarter.
The buyback programme resumed in January after having been suspended for nearly a year due to the pandemic.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.