Credit Suisse Sells $2 Billion of Archegos-Linked Stocks

Credit Suisse Group AG unloaded about $2 billion of stocks tied to the Archegos Capital Management blowup in the second such block sale since the bank wrote down the bulk of its exposure in the first quarter.

The stock offerings included Discovery Inc. and Iqiyi Inc., adding to some $2.3 billion worth of shares tied to the debacle that the bank sold last week, according to people familiar with the matter. The trades follow a torrent of similar transactions that had already erased about $194 billion in market value as banks from New York to Zurich and Tokyo unwound leveraged equity bets by Bill Hwang’s family office.

Shares of Credit Suisse fell as the sale adds to evidence that the Archegos collapse could impact the bank beyond the first quarter, when it took a 4.4 billion franc ($4.8 billion) writedown, its worst trading hit in more than a decade. While the Swiss bank has substantially reduced its exposure, transactions since the end of March weren’t included in the first-quarter results, a person familiar with the matter has said.

Credit Suisse fell as much as 2.2% in early Zurich trading and was 1.2% lower by 9:43 a.m. The stock has lost 15% this year, compared with double-digit gains for an index that includes its European peers.

Read more: Discovery, Iqiyi Fall in Premarket as Credit Suisse Sells Blocks

A spokesperson for Credit Suisse declined to comment on the sale and whether the bank plans more such transactions.

Hwang’s private investment firm became the center of one of the biggest margin calls of all time late last month, and represented one of the most spectacular failures of risk-management and oversight in recent memory. The downfall of Archegos will result in $10 billion of losses to banks, according to analysts at JPMorgan Chase & Co. The debacle could attract regulatory scrutiny and potential fines for the banks involved, the analysts said this week.

Tuesday’s block trades -- which sold at the lower end of ranges -- included 19 million Class A shares of Discovery sold at $38.40, said one of the people, asking not to be identified discussing a private matter. In addition, 22 million Class C shares of Discovery sold at $32.35 while a stake of 35 million Iqiyi shares went for $15.85.

Credit Suisse’s latest sale comes weeks after several rivals dumped their shares to skirt losses. While the firm was one of several global investment banks to facilitate the leveraged bets of Archegos, it was slower than others to unwind the positions and had initially tried to reach some sort of standstill agreement, people familiar with the matter have said.

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 shed their Archegos-linked positions with little financial impact.

Credit Suisse is now planning a sweeping overhaul of its hedge fund business. It has already announced plans to cut its dividend, suspend share buybacks and scrap bonuses for top executives.

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