Credit Suisse and Nomura take hit from U.S. hedge fund; warn of ‘significant’ losses

LONDON — Credit Suisse warned Monday of a “extremely important” hit to its first-quarter outcomes, after it started exiting positions with a big U.S. hedge fund that defaulted on margin calls final week.

In a buying and selling replace earlier than the market open, the Zurich-based lender stated a quantity of different banks have been additionally affected and had begun exiting their positions with the unnamed agency.

Credit Suisse shares slid 10% at the open following the announcement.

“While presently it’s untimely to quantify the precise dimension of the loss ensuing from this exit, it may very well be extremely important and materials to our first quarter outcomes, however the constructive tendencies introduced in our buying and selling assertion earlier this month,” Credit Suisse stated.

The financial institution added that it will present an additional replace on the matter “sooner or later.”

A margin name happens when a dealer calls for that an investor deposits more cash right into a margin account (which permits them to take a position cash borrowed from the dealer) to deliver it to a minimal required quantity. The investor then has to both deposit into the account, or promote some of the belongings held in it.

Nomura additionally issued a buying and selling replace on Monday warning of a “important loss” at one of its U.S. subsidiaries ensuing from transactions with a shopper stateside. Japan’s largest funding financial institution stated it was evaluating the potential extent of the loss, estimated at $2 billion.

Its shares fell 16% on Monday.

“This estimate is topic to alter relying on unwinding of the transactions and fluctuations in market costs,” the financial institution stated.

“Nomura will proceed to take the suitable steps to handle this subject and make an additional disclosure as soon as the impression of the potential loss has been decided.”

It comes as Archegos Capital Management was forced to liquidate positions at the end of last week. The strikes by the multibillion greenback U.S. household workplace, based by former Tiger Management fairness analyst Bill Hwang, brought on a wave of promoting strain on Friday, with U.S. media shares and Chinese web ADRs taking the brunt.

The newest developments come amid a tumultuous 18 months for Credit Suisse. Earlier this month, the bank announced a shakeup of its asset management business and a suspension of bonuses because it appeared to comprise the harm from the collapse of British provide chain finance agency Greensill Capital.

Credit Suisse’s asset administration unit held $10 billion of the agency’s funds and famous that some buyers had threatened authorized motion.

Meanwhile, in February 2020, former CEO Tidjane Thiam resigned following a spying scandal that engulfed the financial institution in 2019. Thiam maintained that he had no information of the surveillance of two former colleagues, together with departed wealth administration boss Iqbal Khan.