A hét részvénye: Credit Suisse (Angol hír)

Issues related to Archegos Capital, US investment fund, have made markets nervous at the end of the previous week and at the beginning of this week. While the situation turned out no to have a major impact on the global markets, at least for now, it had a massive impact on some of the banks Archegos was doing business with. Credit Suisse (CSGN.CH), the Swiss lender, is said to be one of the hardest hit companies.

Archegos default

Archegos Capital was a relatively unknown US investment fund up to recently. However, everything has changed as blocks of shares linked to the fund started to be traded last week. It has turned out that Archegos was massively overleveraged - some media reports claim that it had used the same collateral to secure loans at seven different banks. Archegos took large positions via swaps and CFD contracts and as the fund has defaulted on margin calls, banks started to sell out of positions linked to the company. Over $30 billion in block trades related to the situation were identified. Shares of numerous US and Chinese media companies held by Archegos plunged further, adding to strain and making banks even more vulnerable to losses.

Losses for Credit Suisse can be massive

While some banks like JPMorgan, Morgan Stanley or Deutsche Bank said that they have managed to sell their Archegos-related positions quickly and resulting losses were either small or non-existent. However, this was not the case for everyone. Credit Suisse and Nomura are said to be among the most negatively impacted institutions and both have warned of a material impact to its earnings. When it comes to Credit Suisse, there are no company-provided data on size of losses but reports making rounds in the media do not paint a bright picture - Bloomberg quoted a source familiar with the matter as saying that losses may run into billions while JPMorgan analysts said they would not be surprised if Credit Suisse booked a $3-4 billion losses related to Archegos. To put these figures into context, Credit Suisse had a net profit of around $3.44 billion in 2019 and $2.85 billion in 2020.

Losses related to Archegos Capital may turn out to be higher than the Bank's annual profit. Note that these are not the only losses the Bank faces due to poor risk controls. However, a hit from Greensill Capital is expected to be smaller than from Archegos. Source: Bloomberg, XTB

Another risk-management failure, shareholders dissatisfied

Banks sometimes make costly mistakes. Recent case of Citigroup is a perfect example as the US bank has mistakenly sent a full loan value to lenders of a small US company instead of interest. As a result, the bank lost around $900 million. However, in this case it was clearly an unintended error. Archegos-related loss for Credit Suisse is a different story as it is a result of poor risk management. 

However, losses related to Archegos Capital are not the only proofs of poor risk management practices at Credit Suisse. The company warned that its earnings will also be materially affected by the collapse of Greensill Capital in mid-March 2021. Greensill Capital loss is reasoned with poor due diligence practices at Credit Suisse as the bank failed to ensure that investment policies it held cover exposure to Greensill.

As both events occurred in a short period of time and both will have material negative impact on earnings, it should not come as a surprise that some shareholders have grown weary. Harris Associates, one of Credit Suisse's largest shareholders, said that it expects changes at top management positions amid risk-control failure and if there are no changes, it may have to sell the stock.

Technical Situation

Size of losses remains a key question now as it will determine the hit to Credit Suisse capital ratios. As it is rumoured that losses may run into billions, it may be significant and may require recapitalization of the bank. Resulting dilution of existing shareholders' holdings may exert pressure on the share price. Pressure may also build if the bank does not announce any major changes to its risk management as some institutional investors may decide to steer away from the stock.

While the balance of risks seems to be negative, bulls may find some comfort in the Credit Suisse chart (CSGN.CH). Share price plunged around 20% this week after Archegos' case saw daylight. However, downward move has been halted at the 50% retracement of the post-pandemic recovery run that coincides with the upward trendline. Stock tries to recover today. If the recovery move is maintained, the near-term resistance zone to watch can be found ranging between 10.60 and 38.2% retracement. The 200-session moving average can be found slightly above. On the other hand, if the downward move resumes and stock breaks below the aforementioned trendline, declines may deepen towards 61.8% retracement in the 9.00 area.

Source: xStation5