Credit Suisse and Nomura hit by losses at hedge fund Archegos Capital

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Nomura and Credit Suisse said on Monday that profits could take “significant” hits after a client of their brokerage services defaulted on margin calls last week, disrupting Wall Street. Shares of both banks plunged on Monday, wiping billions of dollars from their market capitalization.

A margin call by a broker forces a client to add funds to their account if the value falls below an agreed level. If he cannot, the broker can empty the client’s shares and liquidate his assets to make up the shortfall.

Archegos could not be reached for comment on Monday and its website could not be accessed.

American media values ​​affected

On its LinkedIn profile page, Archegos Capital Management states that it is a family-owned investment firm specializing in public equities primarily in the United States, China, Japan and Korea, employing “a disciplined approach. and research focused on fundamental stock selection, while adopting a multi-approach investment approach over one year. “
According to Bloomberg, who cited anonymous sources, ViacomCBS (AFTER) and Discovery (DIAL) were among the companies hit by the forced liquidation of Hwang’s positions: shares of each plunged more than 25% on Friday.
Swiss credit (CS) said in a statement that a “large US-based hedge fund” had failed to meet its margin commitments. He said the default affected “certain other banks” as well, but did not name them.

“As a result of the fund’s inability to meet these margin commitments, Credit Suisse and a number of other banks are exiting these positions,” Credit Suisse said.

“While it is currently premature to quantify the exact magnitude of the loss resulting from this exit, it could be very significant and important to our first quarter results,” added the bank.
Nomura Holding (NMR), said its losses could reach $ 2 billion, attributing the blow to “transactions with a US customer”. When asked for details, the company declined to comment on CNN Business.

“Nomura is currently evaluating the extent of the possible loss and the impact it could have on its consolidated financial results,” the company said in a statement, adding that its estimate was calculated based on market prices as of today. that day.

“Given that this is a net rather than a gross exposure, we think this almost certainly means that Nomura will recognize a loss of income in its fiscal fourth quarter ending March 31,” said Michael Makdad , senior equity analyst at Morningstar in Tokyo, in a note Monday.

Nomura shares plunged more than 16% in Tokyo, the worst day of the action in at least 20 years. This move erased more than $ 3 billion from its market value. Shares of Credit Suisse fell around 9% early in the session, also erasing around $ 3 billion from its market cap.

– Charles Riley, Michelle Toh and Laura He contributed to this article.

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