Credit Suisse hit by fallout from Archegos and Greensill scandals

Credit Suisse Group AG Update

The collapse of the family office Arquegos Capital continued to weigh on Credit Suisse’s performance as Swiss banks reported a 78% decline in second-quarter profits.

Group investment banks were on the cusp of a decline in earnings of $ 1.7 billion, down 41% year-on-year, as their desire for risk diminished following a series of scandals.

The last six months have been one of the most turbulent times in the bank’s 165-year history.

Two crises over the collapse of niche financial companies Greensill Capital and Arquegos threaten liquidation of $ 10 billion investment funds, $ 5.5 billion losses, successive senior executive turnover and client legal action threats I was connected.

Credit Suisse Chief Executive Officer Thomas Gottstein said:

“We have significantly reduced risk-weighted assets and leverage exposure, improved the risk profile of investment banks’ prime services businesses, and strengthened the risk capabilities of the entire bank.”

Second-quarter net income fell from CHF 1.2 billion to CHF 253 million.

On Thursday, the bank also released a bitter report on the failure of law firm Paul Weiss on the loss of Arquegos, based on more than 80 interviews and 10 million documents. The report emphasized that both prime brokerage staff and risk managers were unable to effectively manage risk in the bank’s prime services department, although no individual or bank itself was found to have committed fraud. ..

Credit Suisse said it has taken some steps to improve risk management. In addition, after considering the roles of 23 people, he said he had fined $ 70 million, including dismissing nine staff members, including two heads of the prime services business, and regaining previously paid bonuses. I added.

Analysts expected the bank’s earnings growth to decline against the backdrop of a decline in risk appetite in response to the scandal. They also predicted a long-term decline in revenue, hit by a surge in senior turnover and a blow to customer confidence.

Credit Suisse operating expenses were down 1% year-on-year. Banks say this is primarily due to reduced staff bonuses following fallouts from Arquegos and Greensill.

The $ 5.5 billion loss resulting from the collapse of former hedge fund manager Bill Hwang’s Arquegos was particularly embarrassing for Credit Suisse. Reported by FT Despite providing billions of dollars in credit to the Family Office, the bank earned only $ 17.5 million from last year’s relationship.

Credit Suisse has been chaired three months ago by former Lloyds Banking Group CEO Antonio Horta Osorio, promising a complete overhaul of bank risk management, strategy and culture. Since then, we have already begun to strengthen our risk management procedures.

Swiss lender Poached Two Goldman Sachs executives oversee risk management and technology at the same time New group Monitor investment banking transaction risk.

Credit Suisse hit by fallout from Archegos and Greensill scandals Source link Credit Suisse hit by fallout from Archegos and Greensill scandals

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