Credit Suisse shares rally while Archegos ripples spread
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[April 02, 2021] By
Takashi Umekawa and Oliver Hirt
TOKYO/ZURICH (Reuters) -Credit Suisse
shares rose on Thursday, ending a losing streak in which they shed close
to a fifth of their value, though the lender is yet disclose how much it
lost in trades for stricken U.S. fund Archegos.
Defaults on margin calls by Archegos Capital, a family office run by
former Tiger Asia manager Bill Hwang, caused a clutch of banks to
rapidly unwind billions of dollars of his leveraged trades.
Credit Suisse and Japan's Nomura have borne the brunt of those losses,
with the Swiss lender warning it could have a "material impact" on its
profits, but details of who else was exposed to Hwang are still
emerging.
Japanese financial firm Mizuho Financial Group Inc may face a loss of 10
billion yen ($90 million) from deals with Archegos, the Nikkei newspaper
reported on Thursday.
"We refrain from making comments on individual deals, but we don't
currently see any issue that may affect our profit forecast," a
spokeswoman for Mizuho said, adding the bank does not conduct prime
brokerage services globally.
Mizuho's U.S. subsidiary has lent to Archegos, the Nikkei reported.
Mizuho rival Nomura has said it expects to book a $2 billion loss on
Archegos.
Credit Suisse is expected to detail in the coming days the scale of the
losses it is facing as a result of its dealings with Archegos, according
to a source familiar with the matter. Two sources close to the bank said
they could be as high as $5 billion, a figure the bank has declined to
comment on.
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The logo of Swiss bank Credit Suisse is seen at its headquarters in
Zurich, Switzerland March 24, 2021. REUTERS/Arnd Wiegmann/File Photo
Switzerland's second largest lender has lost almost a quarter of its value over
the past month, hit first by worries over its exposure to collapsed UK supply
chain firm Greensill and then Archegos. Supply chain funds run by the bank had
invested $10 billion in securities issued by Greensill, and it is not clear how
much of that they will get back.
The bank said in a notice to investors on Wednesday that it expects to get the
"majority" of that money to be recovered.
Its shares were up 2.6% on Thursday though still down 18.5% for the week, while
Nomura closed up 0.22% but is down 19% since Monday.
Credit Suisse's CoCo, or contingent convertible dollar bond maturing Dec 2023
has fallen more than three cents in price since last Friday and is now trading
at 107.7 points, the lowest since July, MarketAxess data shows.
Average daily trading volumes in the bond spiked in March over $1.9 billion
compared to February levels of $710 million.
Shares of big U.S. banks were headed to end the holiday-shortened week on
Thursday with a mix of gains and losses of 2% or less, despite expectations for
new regulatory scrutiny of trading they do for funds.
(Reporting by Takashi Umekawa in Tokyo, John O'Donnell, and Oliver Hirt in
Zurich and Sujata Rao in London. Additional reporting by David Henry in New
York.Writing by Rachel Armstrong; Editing by Kirsten Donovan and David Evans)
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