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Credit Suisse boosts its capital in the wake of the Archegos crisis

22 Apr 2021 01:49 PM

Credit Suisse will raise more than $ 2 billion to bolster its capital base after it was hit by another US investment fund, Archegos. The demise of Archegos and another major client, the British finance company Greensill, plunged the bank into a crisis, causing losses, layoffs, and bonus cuts at a time when competitors were reaping ample profits from trading and dealmaking.

In another blow to CEO Thomas Gottstein, Switzerland's Financial Regulatory Authority has opened enforcement actions against the bank over how it handled risks around Archegos and Greensill.

The bank said it expected a hit of about 600 million Swiss francs ($ 655.81 million) in Q2 after exiting most of its Archegos positions. The 4.4 billion hit during Q1 of 2021 spent what would have been an excellent trading period, leaving the bank with a pre-tax loss of just under 757 million francs.

Credit Suisse was the bank hardest-hit by exposure to Archegos, a US-based family office that collapsed when it was unable to fulfill margin demands on its equity bets. In response, the bank is cutting its main brokerage business, which it caters to hedge fund clients, by about a third.

Credit Suisse shares have fallen more than 20% so far this year, and scandals have erased the 50% gains its share had registered since November 2020, when optimism about vaccines and a new US administration boosted European finances.

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