Archegos hit UBS and baffles investors as stocks fall

LONDON – UBS surprised market participants Tuesday by announcing that the Archegos Capital saga had taken a profit almost a month after the US hedge fund collapsed.

The Swiss bank waited until its results day to let the markets know about its involvement in the company. This has raised questions about transparency in the industry.

“What surprises me here is the fact that they didn’t announce this sooner,” Storm Uru, manager at Liontrust Global Dividend Fund, told CNBC’s “Squawk Box Europe” on Tuesday.

UBS shares fell nearly 3% in European trading this morning after it was reported that it hit $ 774 million in the first quarter due to the Archegos default.

Maria Rivas, senior vice president at DBRS Morningstar, said UBS’s announcement was “surprising as the bank had not given the market any indication of the issue”.

Various banks were hit by the Archegos collapse, which took too much risk and defaulted on margin calls in March.

We take it very seriously.

Credit Suisse, Nomura, Deutsche Bank, Morgan Stanley and Goldman Sachs have been caught in the crossfire, although some were able to leave their positions earlier than others.

For Credit Suisse, for example, its stake in Archegos meant a success of CHF 4.4 billion ($ 4.8 billion), which had a significant impact on the bank’s performance in the first quarter of the year.

Credit Suisse also announced last week that it would record an additional loss of around CHF 600 million in the second quarter.

“UBS took a similar approach to Morgan Stanley and reported the impact on the results announcement,” said Rivas.

Morgan Stanley was one of the banks mentioned that quickly sold their exposure to Archegos. However, two weeks ago a loss of $ 644 million due to a “credit event” and an associated trading loss of $ 267 million was reported.

“While unexpected, the failure of the Prime Brokerage client caused UBS to depress overall investment banking performance, but the impact was more than offset by strong revenue growth,” added Rivas.

UBS CEO Ralph Hamers spoke to CNBC’s Joumanna Bercetche on Tuesday that the bank was “very disappointed” with the success.

“We take this very seriously. We have a very detailed review of the various prime broker relationships we have, the family office relationship we have, the risk management processes we have to really get those lessons learned and make sure we implement them so it doesn’t happen again in the future, “he said.

Other banks are also investigating what went wrong with Archegos.

Liontrust’s Uru believes that more transparency in the future could end some banking issues. “This has clearly had an impact on UBS and if we move forward on the basis of greater governance transparency, we may not have these issues,” he said.

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