Credit Suisse CS -1.66%
Group AG has said two executives in charge of its primary brokerage unit will leave after losing $ 4.7 billion due to the collapse of hedge fund Archegos Capital Management.
In an internal memorandum, John Dabbs and Ryan Nelson said they would act immediately as co-heads of first services and help the bank until mid-May for an orderly transition.
Their departure comes after Credit Suisse ousted its leading risk officer and the head of its investment bank this month. Several other employees working in equities and risk management also left.
Credit Suisse and other banks suffered heavy losses when Archegos, a US family investment firm, failed to meet margin calls for large, concentrated equities at the end of March.
Credit Suisse was slow to relinquish its positions compared to other banks and suffered the biggest loss. The Wall Street Journal previously reported on Archegos relative to its size as other lending banks.
In addition to the departure of the staff, the bank has launched an internal investigation into what went wrong. A focus of the investigation was on the bank’s main brokerage unit, which managed the relationship with Archegos and enabled the investor to accumulate significant leverage positions in individual stocks.
Credit Suisse and other banks sold Archegos, the so-called total return swaps, a type of contract that allows investors to have economic exposure to a stock without owning the underlying stock or disclosing their positions to the markets. .
Mr. Dabbs has worked for Credit Suisse since 2009. Mr. Nelson joined the rival UBS Group AG in 2018. Together, they led a turnaround from the prime brokerage business that focused on fewer clients to improve profits. Credit Suisse says it is one of the top four brokers in the US, based on the industry rankings.
Major brokerage units of banks serve hedge funds, help them trade, give them credit and present it to outside investors.
After Credit Suisse announced the $ 4.7 billion loss to Archegos on April 6, Credit Suisse slashed its dividend to save capital, and CEO Thomas Gottstein said “serious lessons will be learned.”
Archegos’ problems come just weeks after the collapse of another Credit Suisse client, Greensill Capital, with which the bank managed a set of $ 10 billion investment funds. Credit Suisse says the cost of the funds and a loan to Greensill could be significant, but gives no figure.
Credit Suisse reported Thursday’s earnings in the first quarter. In its April 6 statement, Credit Suisse said it expects to post a pre-tax loss of about $ 1 billion to reflect the Archegos losses.
Write to Juliet Chung at [email protected] and Margot Patrick at [email protected]
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