Credit Suisse rally around for funds after Archegos blow

Credit suisse

Credit Suisse (CSGN.SW) has been forced to tap investors for money to repair its balance sheet as the fallout from the Archegos Capital blowup continues.

The Swiss bank on Thursday announced a loss for the first quarter and raised roughly $2bn (CHF1.8bn, £1.4bn) from investors to help bolster its capital position.

Separately, Switzerland’s financial regulator opened an investigation into the bank’s dealing with Archegos.

Credit Suisse said on Thursday it had raised roughly $2bn through the sale of mandatory convertible notes to “a selected group of core shareholders, institutional investors and ultra-high-net-worth individuals.” Barclays analysts said the fundraising hadn’t been anticipated.

Credit Suisse said its “capital position remained solid” but said funds would be used to “further strengthen” its balance sheet.

The fundraising comes in the wake of the Archegos Capital blow-up. Archegos was a little-known New York family office that spectacularly collapsed last month after making a series of highly leveraged bets on tech and media stocks.

Archegos dealt with a number of investment banks but Credit Suisse has been the worst affected by the collapse. Chief executive Thomas Gottstein told media his bank was one of the top three brokerages working with Archegos.

The collapse pushed Credit Suisse to a CHF757m (£686m, $827) loss in the first quarter, the bank said. While slightly better than initial guidance from the bank, it compares poorly to a CHF1.2bn profit made a year earlier.

The loss came despite a 30% jump in revenues, which was driven by surging activity at its investment bank where revenues accelerated by 80%. That strong performance was wiped out by a CHF4.4bn provision taken to cover losses from Archegos. Credit Suisse’s investment bank lost CHF 2.5bn in the quarter.

Credit Suisse said it was likely to take another CHF600m hit from Archegos in the second quarter as the bank still had about 3% of total positions to exit.

The Wall Street Journal reported late on Wednesday that Credit Suisse’s exposure to Archegos was as high as $20bn at one point. Gottstein declined to give details on a call with media.

FINMA, the Swiss finance regulator, on Thursday said it had opened a file on Credit Suisse’s handling of Archegos. The watchdog will investigate “possible shortcomings in risk management” and confirmed ongoing proceedings related to Greensill.

FINMA has ordered the bank to make short-term changes, including “organisational and risk-reducing measures and capital surcharges as well as reductions in or suspensions of variable remuneration components.”

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