Photographer: Stefan Wermuth / Bloomberg
Photographer: Stefan Wermuth / Bloomberg
Credit Suisse Group AG has offloaded approximately $ 2 billion in shares related to the Archegos Capital Management outage in the second such block sale since the bank written off most of its exposure in the first quarter.
The stock offering included Discovery Inc. and Iqiyi Inc., adding to what According to people familiar with the case, $ 2.3 billion worth of stock is linked to the debacle the bank sold last week. The transactions follow a flood of similar transactions that have already been cleared $ 194 billion in market value as banks from New York to Zurich and Tokyo reduced the leverage of Bill Hwang’s family office equity bets.
Read more: Credit Suisse could have even more impact on Archegos this quarter
Shares of Credit Suisse fell as the sale provides evidence that Archegos’ collapse could affect the bank after the first quarter, when 4.4 billion francs ($ 4.8 billion) was written off, the biggest trading hit in more than a decade. Although the Swiss bank has significantly reduced its exposure, transactions have not been included in its first quarter results since late March, says a person familiar with the case.
Credit Suisse was down a whopping 2.2% in Zurich’s early trading and was down 1.2% at 9:43 a.m. The stock has lost 15% this year, compared to a double-digit rise for an index that includes its European counterparts.
A spokesperson for Credit Suisse declined to comment on the sale and whether the bank is planning more such transactions.
Hwang’s private investment firm became the center of one of the greatest margin calls of all time late last month, representing one of the most spectacular risk management and oversight failures in recent memory. The downfall of Archegos will result in $ 10 billion in losses to banks, according to JPMorgan Chase & Co. analysts analysts said this week.
Read more: Archegos ripples through the lucrative hedge fund business of banks
Tuesday’s block trades – which sold at the lower end of the range – included 19 million Class A shares of Discovery that sold for $ 38.40, said one of the people, who asked not to be identified when he bought a private matter. In addition, 22 million Class C shares of Discovery were sold for $ 32.35, while a 35 million stake of Iqiyi shares cost $ 15.85.
Credit Suisse’s latest sale comes weeks after several rivals ditched their stocks to avoid losses. While the company was one of several global investment banks that enabled Archegos’ leveraged betting, it was slower than others to settle the positions and had initially tried to reach some sort of standstill agreement, say people familiar with the case.
The strategy failed as rivals rushed to cut their losses. Global banks, including Goldman Sachs Group Inc. and Deutsche Bank AG, have told investors that they have divested their Archegos-linked positions with little financial impact.
Credit Suisse is now planning one major overhaul of its hedge fund business. It has already announced plans to cut dividends, suspend share buybacks and remove bonuses for top executives.
– With the help of Patrick Winters
Updates with Credit Suisse shares from third paragraph.