The losses keep mounting for some of the financial world’s supposedly smartest people from the shock failure of Archegos Capital — almost a month after the collapse of the US hedge fund.
Tuesday saw Swiss giant, UBS joined its local rival, Credit Suisse in revealing losses from the collapse while Nomura, the big Japanese investment bank and broker lifted its losses estimate by another $US900 million.
Between the two, the losses from the collapse of Archegos jumped by $US1.6 billion and there is another $US700 million to come from Credit Suisse this quarter as well.
All up the losses now exceed $US12 billion.
Some investors complained that UBS had waited until its results day to inform markets about its exposure to the firm, a move that has again sparked questions about transparency in the industry.
UBS reported a $US861 million dollar loss from its links to Archegos ($US774 million for the three months to March alone).
Despite this hit UBS reported net income of $US1.8 billion for the first quarter of 2021.
Revenue rose to $US8.7 billion from $US7.9 billion a year ago.
UBS said it had exited all exposure to Archegos and any related losses in the second quarter would be “immaterial” for the bank.
Meanwhile Nomura, the big Japanese financial group confirmed losses of $US2.3 billion for its March 31 2020-2021 linked to the sudden liquidation of holdings by US hedge fund Archegos. It expects to report a further $US577 million in losses from this situation in the financial year ending March 31, 2022. That makes a total of $US2.85 billion, at the moment.
Credit SuIsse lost $US4.8 billion with the remaining $US700 million to come. Nomura’s losses exceed $US2.9 billion. Morgan Stanley reported losses of close to $1 billion. Japanese bank, MUFG lost an estimated $270 million and a second Japanese bank, Mizhuo may have lost $US70 million.
That’s losses of $US10 billion or more on dealings with a supposedly $US20 billion worth of investments with Archegos.
On top of this Credit Suisse was forced to raise almost $US2 billion in new capital from shareholders, so that takes the total cost of more than $US12 billion.
Incredible.
