Credit Suisse executives leave after losses of Archegos and Greensill | Swiss credit
Credit Suisse canceled directors’ bonuses, cut its dividend and announced the departure of two senior executives as the bank revealed £ 3.4 billion in losses following the collapse of investment fund Archegos.
Swiss bank reeling from heavy exposure to Archegos and merchant bank Greensill, which has experienced successive but unrelated financial explosions.
Archegos, an American hedge fund hitherto almost unknown, was forced to liquidate nearly $ 20 billion (£ 14 billion) in assets at the end of March in an inflammatory sale that spilled over into global markets. Greensill, a supply chain lender created by the Australian banker Lex Greensill, is in liquidation and mired in a political scandal. Both caused heavy losses to the banks that had backed them.
Credit Suisse on Tuesday announced losses of 4.4 billion Swiss francs (£ 3.4 billion) linked to Archegos, and said it would provide an update on the losses of four Greensill funds in a few days .
Brian Chin, chief executive of investment banking at Credit Suisse, and Lara Warner, chief risk and compliance officer, will both be stepping down, Credit Suisse said.
Thomas Gottstein, chief executive of Credit Suisse, said the loss of Archegos was “unacceptable” and acknowledged that she and Greensill had caused “significant concern”.
“Serious lessons will be learned,” he said. “Credit Suisse remains a formidable institution with a rich history.”
The Zurich-based bank said its board would not receive a bonus for the fiscal year as of April 1 and cut its dividend by two-thirds from 0.29. at 0.10 Swiss francs per share. In a letter to shareholders outlining the measures, Urs Rohner, who lost his compensation of 1.5 million Swiss francs (£ 1.2 million), particularly highlighted the losses of Archegos as the cause of the dividend cut. .
Credit Suisse has also delayed the shareholder vote to confirm its board of directors.
The bank’s shares have fallen 19% since March 29, when extent of Archegos chaos became clear.
Archegos was a fund managed by and managing the personal fortune of Bill Hwang, an investor who had accumulated significant positions in companies worth billions of pounds, despite a previous conviction for insider trading.
The Credit Suisse investment bank under Chin acted as prime broker to the Archegos funds, lending it large sums of money to enable it to build up larger positions in the holdings of listed companies. Hwang had made big bets that some stocks, including Chinese tech company Baidu and US media group ViacomCBS, would see their stock prices rise. When stocks fell, Hwang and its lending banks suffered heavy losses.
Greensill collapsed after insurers and lenders including Credit Suisse withdrew his support for its supply chain finance funds, which loaned money against the promise of future income from unpaid invoices from customers, including the metallurgical group GFG Alliance. Greensill has been heavily exposed to GFG, whose trade has been affected by the Covid-19 pandemic.
Credit Suisse, whose high net worth clients have invested their savings in Greensill loan support packages, including funds loaned to GFG, has turned to the courts to recover cash from GFG companies and Greensill directors. . GFG boss Sanjeev Gupta insists GFG does it no need to pay back billions of pounds on loan from Greensill yet, and scrambles to find a lender to prevent the collapse of its steel companies.
Credit Suisse’s role at the center of two major collapses was the latest failure to shine the spotlight on potential problems with its risk management: it also suffered losses Wirecard and Luckin Coffee scandals.