Credit Suisse Surprises With $2 Billion Capital Raise, Still Has Exposure To Archegos In "Three Distinct Positions"

To summarize, here are five key takeaways from the Credit Suisse Q1 earnings from Goldman...

  • Archegos: Loss scaled up to US$5 bn (previous: US$4.4 bn), and a 3% residual position remains.
  • Supply-chain finance funds: of the US$ 10bn of funds, held by CS clients: ~54c/$ has been reclaimed by CS, with ~48c/$ paid back to investors. CS expects this number to rise meaningfully and indicated it does not see recourse to its capital.
  • IB: (1) RWA for IB will be flat on Q4-20 (Q1-21: US$99 bn, Q4-20: US$88 bn), implying a cut of US$11 bn; (2) Leverage exposure cut of US$35 bn, driven mostly by cutting PB balances by 1/3; (3) broad review of IB operations is underway, and expected to continue through 2021.
  • Strategic review: A comprehensive review is underway across the group but with a focus on prime brokerage operations. The incoming Chairman (to start on May 1st) is expected to lead the review.
  • Outlook: 2Q-21 expectation is for a slowdown in IB, and an impact from Archegos. WM businesses should benefit from better recurring commissions and fees reflecting higher AuMs whilst NII should be stable. The bank did not see meaningful flows since the beginning of the quarter.

... and Bloomberg:

  • The performance numbers took a back seat as investors got the surprise of a $2 billion capital raising to make up for the Archegos hedge-fund collapse. The shares fell as much as 6%
  • CEO Thomas Gottstein said it was the right thing to do, to get capital concern off the table as an issue, even if the price level wasn’t particularly appealing
  • Gottstein held back on details of the bank’s risk-management review, saying he wants to wait until investigations by regulators are complete. He did point to disclosure for family offices and the bank’s absolute limits for clients as areas that need to be looked at
  • The Swiss lender also was cautious on the outlook for the investment bank, as it expects less market activity and it aims to shrink its prime-brokerage division
  • On the other pending issue, the Greensill funds, the bank said more time is needed to determine how much money can
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