A pedestrian walks by the logo of Swiss banking giant UBS engraved on the wall of its headquarters.
FABRICE COFFRINI/AFP/Getty Images
The tally from the wipeout of Archegos Capital Management to bank bottom lines keeps growing.
On Tuesday, Nomura Holdings said it recorded a 245.7 billion yen ($2.3 billion) loss from Archegos, slightly more than the $2 billion loss the Japanese bank initially estimated. That led the bank to record a 155.4 billion yen loss for its fiscal fourth quarter.
The real surprise came from UBS, which revealed a $774 million hit to its operating profit. The Swiss bank still managed to record a profit for the first quarter, of $1.82 billion, a gain of 14%.
“We are all clearly disappointed and are taking this very seriously. A detailed review of our relevant risk management processes is under way and appropriate measures are being put in place to avoid such situations in the future,” said UBS Chief Executive Ralph Hamers in a statement.
Archegos, the family office of former Tiger Management analyst Bill Hwang, couldn’t meet its margin obligations after a series of highly leveraged investments on U.S. media and Chinese internet stocks. Credit Suisse has lost the most, $5.5 billion, and Morgan Stanley has revealed a $911 million hit. Mitsubishi UFJ has said it anticipates losing $300 million from Archegos.
Goldman Sachs appears to be the only bank doing business with Archegos that didn’t record a sizable loss.
The Archegos losses have called into question the prime brokerage business, the practice of offering brokerage and related services to hedge funds and other clients. Credit Suisse has said it is going to reduce the leverage it provides by at least $35 billion. UBS also is reviewing that business.
Credit Suisse is the only bank of the group to raise capital after the Archegos losses, a sign of the larger cushions the banks now employ due to rule changes made after the 2008 financial crisis.
