Credit Suisse Archegos Hit May Swell by $400 Million After Sales

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Credit Suisse Group AG may face another hit of about $400 million this quarter from the collapse of Archegos Capital Management, according to analysts at JPMorgan Chase & Co., as the Swiss bank continues to unwind holdings linked to Bill Hwang’s family office.

Sales of more than $4 billion in Archegos-linked stocks this month suggest Credit Suisse will have to report additional losses, analysts led by Kian Abouhossein wrote in a note. The transactions weren’t part of a $4.7 billion first-quarter writedown the bank flagged earlier this month, a person familiar with the matter has told Bloomberg. Credit Suisse has declined to comment on whether more such sales are expected.

“We see these sales putting further question marks around risk management and size of exposure to Archegos as we do not know if there are further such sales still coming,” the analysts wrote. Credit Suisse “needs to draw a line under this issue” and it should provide “full clarity” on the Archegos impact when it reports results on Thursday, they wrote.

Credit Suisse has emerged as the bank hardest-hit by Archegos, which collapsed when it couldn’t meet margin calls after some of its investments lost value. The Swiss bank unsuccessfully tried to broker a standstill agreement among lenders to Hwang’s firm and was left holding the bag when rivals rushed for the exit. The handling of the issue resulted in the bank’s worst trading disaster in more than a decade and revived questions over Chief Executive Officer Thomas Gottstein’s handle on risk-taking.

Weeks after peers exited their holdings, Credit Suisse has kept selling Archegos-linked stocks, with at least two block trades totaling about $4.3 billion hitting the market this month, Bloomberg has reported. The bank is now planning a sweeping overhaul of the hedge fund unit, people familiar with the matter have said. Risk chief Lara Warner and investment bank head Brian Chin have left. The bank plans to cut the dividend, suspend share buybacks and scrap bonuses for top executives.

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