Credit Suisse Faces $4.7 Billion Loss Related to Archegos Capital

[Image source= Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] Swiss investment bank Credit Suisse announced on the 6th (local time) that it will reflect a loss of 4.4 billion Swiss francs (approximately 4.7 billion dollars, 5.2668 trillion won) related to Archegos Capital Management, which was managed by Korean-American fund manager Bill Hwang.

Accordingly, Credit Suisse stated that it will record a pre-tax loss of 900 million Swiss francs in the first quarter of this year. It also announced that it will reduce dividends. In addition, it added that Brian Chin, head of the Investment Banking (IB) division, and Lara Warner, Chief Risk Officer (CRO), will leave the company.

Archegos Capital Management is a family office managed by Bill Hwang. Bill Hwang used derivatives called total return swaps (TRS) to make large-scale leveraged investments exceeding 50 billion dollars with actual assets of about 10 billion dollars. Earlier this year, a large loss occurred in the investment assets, leading to margin call requests, but he failed to meet the margin requirements. Banks that lent funds to Bill Hwang also suffered large losses. JP Morgan Chase estimated that the losses of banks related to Archegos Capital could reach up to 10 billion dollars.

Previously, Nomura, Japan's largest securities firm, announced that it expected losses of about 2 billion dollars related to Archegos.

Credit Suisse was considered the bank that suffered the largest loss. The loss amount disclosed by Credit Suisse exceeds the estimated loss amounts cited by foreign media analysts. Earlier, foreign media expected Credit Suisse's loss to be up to 4 billion dollars.

Credit Suisse was also reported to have suffered large losses related to the investment in UK financial company Greensill Capital in February.

Thomas Gottstein, CEO of Credit Suisse, stated that the consecutive losses related to Archegos Capital and Greensill Capital investments have provided significant lessons. He said, "I understand that shareholders have considerable concerns," and emphasized, "The management of Credit Suisse will do its best to resolve this situation, and Credit Suisse will learn a lot from this incident." Gottstein took office as CEO of Credit Suisse in February last year.