Credit Suisse and Nomura warn of hedge fund hit to profits

Two of the world’s biggest investment banks have warned their profits are likely to be severely affected by a crisis at a US hedge fund.

Switzerland’s second-biggest bank Credit Suisse said it could have a “highly significant” impact on its next quarterly results.

Japan’s Nomura said its next quarterly profits would be wiped out.

Both have been hit by problems at hedge fund Archegos, which led to the sale of billions of pounds of shares on Friday.

Companies caught up in the selling spree include big names such as ViacomCBS, Discovery, Tencent, Baidu, and UK online retailer Farfetch.

Investors in both banks have been rattled, Credit Suisse shares are down 14% and Nomura’s closed down 16% on the Japanese stock market.

Fears over who else might be affected by the matter has prompted falls in the shares of other banks, including Deutsche Bank and Goldman Sachs, although by far smaller amounts.

Credit Suisse’s fortunes are already facing a hit from its lending to Greensill Capital, the finance firm whose collapse has put at risk the future of the UK’s Liberty Steel.

‘Material’ loss
In a statement issued on Monday, Credit Suisse said: “A significant US-based hedge fund defaulted on margin calls made last week by Credit Suisse and certain other banks.

“Following the failure of the fund to meet these margin commitments, Credit Suisse and a number of other banks are in the process of exiting these positions.

“While at this time it is premature to quantify the exact size of the loss resulting from this exit, it could be highly significant and material to our first quarter results.”

Nomura said it faced a possible $2bn (£1.4bn) loss due to transactions with a US client.

Neither named Archegos Capital Management, which, although not a household name, is a big player in US markets.

It is the family investment firm of Bill Hwang, who was banned in 2014 from trading in Hong Kong, and in 2012 settled insider trading charges in the US.

Agencies