Credit Suisse reports $275 million first-quarter loss after Archegos hedge fund scandal

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  • The bank said its losses reflected a “significant charge with respect to the US-based hedge fund matter in 1Q21 (first quarter).”
  • Credit Suisse said it had now exited 97% of its trading positions relating to Archegos hedge fund.
  • The Swiss lender expects to take an additional loss in the second quarter of around 600 million Swiss francs.

© Provided by CNBC A Credit Suisse logo in the window of a Credit Suisse Group AG bank branch in Zurich, Switzerland.

LONDON — Credit Suisse reported Thursday a net loss of 252 million Swiss francs ($275 million) for the first quarter, at a time of increased pressure on the bank.

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It said the loss reflected a “significant charge with respect to the US-based hedge fund matter in 1Q21 (first quarter), offsetting positive performance across wealth management and investment banking.”

It comes after the Swiss lender warned of heavy losses earlier this month following a scandal involving Archegos Capital, a U.S. based hedge fund, which collapsed after taking on too much risk. Credit Suisse said it took a hit of 4.4 billion Swiss francs as a result. In addition, investment bank CEO Brian Chin and chief risk and compliance officer, Lara Warner, both stepped down. The executive board decided to waive bonuses for the 2020 year, and also cut the proposed dividend.

The scandal has had a significant effect on the bank’s earnings. Credit Suisse said Thursday that adjusted net revenue would have hit 7.4 billion Swiss francs excluding significant items if it hadn’t been for the Archegos situation. This would have represented a 35% increase from a year ago.

“Our results for the first quarter of 2021 have been significantly impacted by a CHF (Swiss franc) 4.4 billion charge related to a US-based hedge fund. The loss we report this quarter, because of this matter, is unacceptable,” Thomas Gottstein, chief executive of Credit Suisse, said in a statement alongside Thursday’s results.

In March, Credit Suisse also adjusted its asset management business and suspended bonuses after the collapse of Greensill Capital, a British supply chain finance firm.

More losses ahead

Credit Suisse said Thursday it had exited 97% of its trading positions relating to Archegos hedge fund and expected to report an additional loss in the second quarter of around 600 million Swiss francs.

The Swiss Financial Market Supervisory Authority said on Thursday it had opened enforcement proceedings against Credit Suisse due to its losses relating to Archegos’ collapse. The regulator also said it had begun proceedings last month against the bank over the Greensill case.

“Supplementing measures taken by the bank, FINMA has in addition required various risk-reducing measures,” the Swiss authority said in a statement.

Other highlights in Credit Suisse’s first-quarter earnings:

  • CET 1 capital ratio, a measure of bank solvency, came in at 12.2%, down from 12.9% at the end of 2020.
  • Net revenue reached 7.6 billion Swiss francs, up from 5.2 billion Swiss francs in the fourth quarter of last year.
  • Total operating expenses fell to 3.9 billion Swiss francs from 5.2 billion Swiss francs in the previous quarter.
  • Its investment banking division reported net revenue of $3.9 billion, an increase of 80% from a year ago.
  • Wealth management division reported net revenue of 3.9 billion Swiss francs over the quarter, marginally higher from a year ago.

In response to the results, Octavio Marenzi, CEO of consultancy firm Opimas, said in an email: “It is such a shame – the Credit Suisse investment banking arm was about to turn in one of its best quarters ever, before the charges related to Archegos.”

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