Credit Suisse investment bank, risk chiefs to depart after Archegos fiasco: Sources

NEW YORK (REUTERS, BLOOMBERG) – Credit Suisse will announce the departure of two senior executives and detail how much it expects to lose through its exposure to Bill Hwang’s family office Archegos Capital in an investor update on Tuesday (April 6), sources familiar with the matter said.

The Swiss bank will say that chief risk officer Lara Warner and Brian Chin, CEO of its investment bank, will leave the bank, the sources said on Monday.

Defaults on margin calls by Archegos, a family office run by former Tiger Asia manager Bill Hwang, caused a clutch of banks to rapidly unwind billions of dollars of his leveraged trades last month.

Credit Suisse was still unwinding its positions Monday, the sources said.

Its losses could be as high as US$5 billion (S$6.7 billion), the sources said, a figure the bank has declined to comment on.

The bank was already facing scrutiny over its relationship with British finance firm Greensill, which collapsed into insolvency last month.

The combined hit from both relationships could reach US$7.5 billion, JPMorgan said on Monday.

The bank is expected to say Ms Warner and Mr Chin will pay the price for those failures by departing, the sources said. Chief executive officer Thomas Gottstein will remain in post. 

The firm is also planning a review of its prime-brokerage business.

Mr Chin was promoted to chief executive officer of the investment bank last year when Mr Gottstein merged the unit with trading operations after the departure of former CEO Tidjane Thiam. The restructuring marked a victory for Chin, who helped transform the business from a perennial under-performer during a large part of Mr Thiam’s tenure to a key profit contributor. In 2016, Mr Chin was named chief executive of global markets and joined the bank’s executive board.

Mr Gottstein took over in February 2020 in the wake of a spying scandal that took down his predecessor. He pledged a clean slate for 2021, but the firm has instead been overwhelmed by repeated lapses in oversight, including major hits from the collapse of Greensill Capital and the Archegos turmoil.

The blow-ups have left analysts asking whether Credit Suisse has a systemic problem in risk management, and investors facing another quarter of losses. The bank’s 1.5 billion Swiss franc (S$2.15 billion) share buyback programme is at risk of being paused for the second time – after first being stopped at the onset of the pandemic last year – and losses could put pressure on the bank’s dividend distribution.

Also on Monday, Credit Suisse started unloading stocks tied to the Archegos blow-up – more than a week after some rivals dumped their shares and skirted losses.

The Swiss bank hit the market with block trades tied to ViacomCBS, Vipshop Holdings and Farfetch that totalled more than US$2 billion (S$2.68 billion) at current prices, a person with knowledge of the matter said. The stocks are trading substantially below where they were last month before the implosion of Archegos.

Shares in the three companies declined in post-market trading, as did US-listed shares of Credit Suisse.

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