Bill Hwang’s Archegos Capital may have inflicted US$10 billion in total losses for the world’s banks and brokers from Wall Street to Zurich and Tokyo, JPMorgan says
- Losses from trades unwinding related to Archegos will be “very material”, JPMorgan analysts led by Kian Abouhossein wrote
- JPMorgan had previously estimated losses in the range of US$2 billion to US$5 billion
Banks roiled by the Archegos Capital fallout may see total losses in the range of US$5 billion to US$10 billion, according to JPMorgan.
“We are still puzzled why Credit Suisse and Nomura have been unable to unwind all their positions at this point,” the analysts wrote, adding that they expect to see full disclosures from lenders by the end of this week.
The analysts advised investors to keep an eye on credit agencies’ statements as they expect poor risk management to be an issue.
The bank’s plans to buy back 1.5 billion Swiss francs (US$1.6 billion) of shares are at risk, according to Berenberg analyst Eoin Mullany. He estimates the lender could face losses of US$3 billion to US$4 billion.
“The hits just keep coming for Credit Suisse,” he wrote in a note Mullany.
Preceding the Archegos losses were the liquidation of its supply-chain finance funds linked to collapsed financier Lex Greensill and a writedown on a stake in hedge fund York Capital Management taken in the fourth quarter.
The buy-back program resumed in January after having been suspended for nearly a year due to the pandemic.
Wells Fargo did not experience losses tied to unwinding its relationship with Archegos Capital Management, the firm said Tuesday in a statement.
“We had a prime brokerage relationship with Archegos,” the bank said. “We were well collateralised at all times over the last week and no longer have any exposure.”