Credit Suisse, Nomura collapse as banks blame Archegos damage

Nomura Holdings Inc. and Credit Suisse Group AG both plunged more than 14% after saying they risked “significant” losses, with some of the world’s largest banks counting their exposure to misguided bets in Archegos Capital Management.

Lenders at Bill Hwang’s New York family office are working to contain the fallout after Archegos failed to respond to margin calls last week. Forced liquidation of over $ 20 billion in firm-linked positions rocked stocks Baidu Inc. at ViacomCBS Inc., highlighting the opaque world of leveraged trading strategies facilitated by some of the biggest names on Wall Street.

While the turmoil has so far had only a limited impact on broader financial markets, banks and those familiar with the matter have indicated that the outcome of the Archegos-related bets may have more to do. Credit Suisse and other lenders are still exiting their positions, the bank said on Monday in a statement that did not mention Archegos by name. Morgan Stanley was buy a large block of ViacomCBS shares on Sunday, people familiar with it said.

The saga has captivated much of the financial industry, part of which has piled on leverage in recent years amid historically low interest rates and one of the strongest bull markets on record.

Much of Hwang’s dealings remain uncertain, but market participants estimate his assets have grown from $ 5 billion to $ 10 billion, and total positions may have exceeded $ 50 billion.

Much of the leverage was provided by banks through swaps, according to people with direct knowledge of the transactions. This meant that Archegos did not have to disclose its holdings in regulatory deposits, as the positions appeared on banks’ balance sheets.

Nomura, whose shares fell a record 16% in Tokyo on Monday, said in a statement that the estimated amount of its claim against an unidentified U.S. client was around $ 2 billion. This client is Archegos, according to people familiar with the matter.

Credit Suisse said if it was premature to quantify the extent of its loss, it could be “very significant and important to our first quarter results.”

Shares of the Swiss lender, which was also embroiled in a scandal over the collapse of Lex Greensill’s trade finance empire, fell 14% on Monday. The European Stoxx 600 index was little changed, while futures on the S&P 500 index slipped 0.5% after the benchmark US equity index closed at a record high on Friday.

For Credit Suisse, the blow is particularly difficult given that the bank still faces considerable uncertainty over a possible financial blow related to Greensill and the reputational damage suffered in the past year following a corporate scandal. ‘spying.

CEO Thomas Gottstein, who had promised to start the year with a clean slate, sees the company playing a pivotal role in a major financial explosion for the second time in weeks. Earlier this month, the bank confused investors by suspending – and then deciding to liquidate – $ 10 billion in supply chain finance funds it managed with Greensill.