MUFG Securities Unit to Book $270 Million Loss on Archegos

Mitsubishi UFJ Financial Group Inc.’s securities arm will book a $270 million loss after it closed all positions with a U.S. client at the center of a massive unwinding of leveraged bets that roiled a number of global banks.

The unit will book the hit, which is slightly lower than a previously estimated $300 million, in next quarter’s results, Japan’s largest bank said in a statement Wednesday, without naming the client. The loss is linked to Bill Hwang’s Archegos Capital Management, Bloomberg has reported.

Lenders are just starting to tally the carnage stemming from the liquidation of more than $20 billion of positions linked to Hwang’s New York-based family office. The debacle has roiled stocks from Baidu Inc. to ViacomCBS Inc. and cast a spotlight on the opaque world of leveraged trading strategies. Nomura Holdings Inc. and Credit Suisse Group AG have both warned of “significant” losses in the wake of the selloff.

The loss could badly dent MUFG’s European securities operations. The firm’s London-based subsidiary, MUFG Securities EMEA, posted a profit of just 84 million pounds ($116 million) in 2019, according to the most recent filing available from the U.K. Companies House. Mitsubishi UFJ Securities reported pre-tax profits from the region of about 17 billion yen ($154 million) for the three quarters through December, a presentation shows.

Earnings Forecast

Separately, MUFG said its profit for the fiscal year ending March 31 probably rose about 42% from a year earlier to 750 billion yen. The bank lifted its annual net income forecast to 600 billion yen in November due to its strong overseas investment banking business. Profit totaled 528.1 billion yen a year earlier.

The higher estimate reflects net gains on equities along with windfalls from its investment in Morgan Stanley, it said.

MUFG said its dividend forecast has not been changed. The bank is scheduled to announce its full-year earnings on May 17. Shares closed down 3.9% on Wednesday before the announcements.

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