The Strategist

Credit Suisse, Nomura warn of potential losses due to Archegos Capital default

03/30/2021 - 06:54

Credit Suisse Group and Nomura Holdings said they could suffer significant financial losses because of problems with one of their US clients.

None of the financial companies would specify the name of the client, but The Wall Street Journal linked the companies' problems to Bill Hwang's family fund, Archegos Capital Management. It was previously reported that he was behind a massive sell-off of shares worth almost $30bn.

"A major US hedge fund defaulted on margin calls made last week by Credit Suisse and several other banks," the Swiss bank said in a statement. "After the fund defaulted on margin calls, Credit Suisse and several other banks launched an exit process from those positions.

Credit Suisse, Nomura, Morgan Stanley, Goldman Sachs and Deutsche Bank were the main brokers of the Archegos Capital fund and lent both cash and securities to it. 

Last Friday, the banks started to put the stakes associated with Archegos Capital up for sale. This resulted in a plunge in the prices of companies in which Mr. Hwang held stakes through his family's fund. Companies involved in the sell-off - ViacomCBS, Discovery, Baidu and other US and Chinese IT and media companies - lost $33bn in capitalisation. Nomura shares on Monday collapsed by more than 16%, which was the largest fall in the history of the Japanese company at the end of one trading day. Credit Suisse shares plummeted more than 14%.