Credit Suisse Group AG

[cyclone]

Credit Suisse takes $4.7 billion hit from Archegos hedge fund scandal; execs step down
* Last week, Credit Suisse revealed that it was expecting heavy losses in the wake of the meltdown of U.S. hedge fund Archegos Capital.
* It took a charge of $4.7 billion as a result and now expects a first-quarter pre-tax loss of around $960.4 million.
* Investment Bank CEO Brian Chin and Chief Risk and Compliance Officer Lara Warner will step down from their roles with immediate effect.

Elliot Smith
PUBLISHED TUE, APR 6 20211:16 AM EDT
UPDATED TUE, APR 6 20216:17 AM EDT

Credit Suisse on Tuesday announced several high-level staff departures and proposed a cut to its dividend as it weighs heavy losses from the Archegos Capital saga.

The Swiss lender now expects a first-quarter pre-tax loss of around 900 million Swiss francs ($960.4 million), after taking a charge of 4.4 billion Swiss francs as a result of the scandal.

“The significant loss in our Prime Services business relating to the failure of a U.S.-based hedge fund is unacceptable,” CEO Thomas Gottstein said in a trading update.

Investment Bank CEO Brian Chin and Chief Risk and Compliance Officer Lara Warner will step down from their roles with immediate effect, the bank said.

Last week, Credit Suisse revealed that it was expecting heavy losses in the wake of the meltdown of U.S. hedge fund Archegos Capital. The bank was forced to dump a significant amount of stock to sever its ties to the troubled family office.

The executive board has also waived its bonuses for the 2020 financial year, the bank announced Tuesday, with Chairman Urs Rohner giving up his “chair fee” of 1.5 million Swiss francs.

At its AGM on April 30, Credit Suisse will now propose a dividend of 0.10 Swiss francs gross per share along with the amended compensation report.

“Particularly following the significant US-based hedge fund matter, the Board of Directors is amending its proposal on the distribution of dividends and withdrawing its proposals on variable compensation of the Executive Board,” the Swiss lender said in a trading update.

It has suspended its share buyback program and said it does not intend to resume share purchases until it has regained its target capital ratios and restored its dividend.

Credit Suisse shares gained 1.7% by late morning trade in Europe.

More details in https://www.cnbc.com/2021/04/06/credit-s...-down.html

[weijian]

Age old human behavior - No one wants to be the one to say NO when everyone else is making money. It is better to fail conventionally than succeed unconventionally.

Archegos indictment raises fresh questions over banks' risk management controls

Archegos defaulted in late March 2021 after the value of its trades sank and banks called in their credit lines, leaving global lenders, including Credit Suisse, Nomura Holdings, Morgan Stanley and UBS Group, with combined losses of around US$10 billion.

Alma Angotti, partner at risk management advisory firm Guidehouse and a former SEC enforcement official, said even though banks were lied to, regulators still may be looking at whether their risk management programs were inadequately designed or implemented.

“Maybe they didn’t have the appropriate scepticism to say this doesn’t make sense.”

https://www.businesstimes.com.sg/banking...t-controls

[Behappyalways]

Credit Suisse Craters To Record Low After Revealing Staggering $88 Billion Bank Run
https://www.zerohedge.com/markets/credit...n-bank-run

[Behappyalways]

Fast forward another two weeks to today, as CS stock craters 7% to a fresh all-time low, after reports from Reuters and Bloomberg that in hopes of reversing the seemingly endless bank run - and who can blame depositors from pulling their money from a company whose stock is less than $3 from zero - Credit Suisse is now offering aggressively higher deposit rates to attract new funds from wealthy clients in Asia.

Citing sources, Reuters notes that the Swiss bank is offering a 6.5% annual rate on new three-month deposits of $5 million or above - and a rate as high as 7% for one-year deposits - far above matched maturity Bills, and suggesting that to attract a client, the bank is forced to eat a loss. The hope, of course, is that after it attracts enough new clients, the bank will then be able to quietly lower the rates and make the new accounts profitable, however as the various DeFi blow ups of 2022 showed, it never quite works out that way.


Credit Suisse Crashes To All Time Low After Boosting Deposit Rates To Reverse Bank Run
https://www.zerohedge.com/markets/credit...e-bank-run

[CY09]

They should come to Singapore to offer this rate. The bank's deposit rates here are paltry between 4-5%.

I think if they offer 6% here, they will have a long queue of retirees which will solve their bank run problem

[weijian]

So once again, theory and practice don't reconcile when it is in practice. Nonetheless, shareholders are not any better.

Credit Suisse says US$17 billion of its debt now worthless, angering bondholders

CREDIT Suisse said 16 billion Swiss francs (S$23.1 billion) of its Additional Tier 1 debt will be written down to zero on the orders of the Swiss regulator as part of its rescue merger with UBS, angering bondholders on Sunday.

It means AT1 bondholders appear to be left with nothing while shareholders, who sit below bonds in the priority ladder for repayment in a bankruptcy process, will receive US$3.23 billion under the UBS deal.

https://www.businesstimes.com.sg/interna...ondholders

[Behappyalways]

https://mobile.twitter.com/Mayhem4Market...0493691932


坐拥5800亿资产，30亿被收购，瑞士信贷还有多少雷没爆？
https://m.youtube.com/watch?v=Ru50qh5tecU

[Big Toe]

The irony of it all. Basel III banking reforms is still in progress when another crisis hits. And it happened in its own backyard of the Switzerland-based Basel Committee. To be fair, the banks were in a much better position to weather this crisis due to tighter capital/leverage/liquidity requirements. Much like the covid vaccine, it cant prevent people from getting it, but it can make severe sickness less likely. Current risk management, even though strict, is still inadequate to address sudden and rapid change in economic conditions.

Going forward, while Fed may pause its hikes soon, banks most likley will increase their capital buffers, tighten leading. This together with QT/reasonably high interest rates will lead to a cooling of asset prices(maybe higher NPLs?), reduced growth, lower economic activities. Anyone have views different from mine?

[EnSabahNur]

So once again, theory and practice don't reconcile when it is in practice. Nonetheless, shareholders are not any better.

Credit Suisse says US$17 billion of its debt now worthless, angering bondholders

CREDIT Suisse said 16 billion Swiss francs (S$23.1 billion) of its Additional Tier 1 debt will be written down to zero on the orders of the Swiss regulator as part of its rescue merger with UBS, angering bondholders on Sunday.

It means AT1 bondholders appear to be left with nothing while shareholders, who sit below bonds in the priority ladder for repayment in a bankruptcy process, will receive US$3.23 billion under the UBS deal.

https://www.businesstimes.com.sg/interna...ondholders

It might be worth reading what John Hempton says about this. I think it is one of those cases where the devil is in the details. Or in this case, the devil was never really hiding at all.

https://johnhempton.substack.com/p/at1-b...-your-fund

[Behappyalways]

Credit Suisse inquiry will keep files secret for 50 years
https://www.reuters.com/business/finance...ce=twitter