Credit Suisse Group AG (NYSE:CS) (SWX:CSGN) CEO Thomas Gottstein says the loss the investment bank sustained in Archegos was “unacceptable.” The firm reported net losses of 252 million Swiss francs ($275 million) for the first quarter.
Credit Suisse reports loss from Archegos
Credit Suisse said the loss was due to a "significant charge with respect to the U.S.-based hedge fund matter in 1Q21), offsetting positive performance across wealth management and investment banking." Earlier this month, the Swiss bank warned it would report deep losses after a scandal that involved Archegos Capital.
For the first quarter of 2022, the Voss Value Fund returned -5.5% net of fees and expenses compared to a -7.5% total return for the Russell 2000 and a -4.6% total return for the S&P 500. According to a copy of the firm’s first-quarter letter to investors, a copy of which ValueWalk has been able Read More
The U.S.-based hedge fund took on too much risk and collapsed. In addition to the massive loss, the Swiss bank said Investment Bank CEO Brian Chin and Chief Risk and Compliance Officer Lara Warner stepped down. The executive board waived bonuses for the 2020 fiscal year and cut the firm's proposed dividend.
Best quarter in more than a decade
Credit Suisse reported a loss of 4.4 billion Swiss francs due to Archegos' collapse, which it said "significantly impacted" its results for the first quarter. Credit Suisse said it would have reported 7.4 billion Swiss francs in net revenue for the quarter if it hadn't been for the loss from the fall of the hedge fund. That would have been a 35% jump from last year.
Gottstein told CNBC this morning that excluding the Archegos loss, the first quarter was one of the bank's best quarters ever and "definitely the best quarter in the last 10 years." He called the loss in Archegos "unacceptable," adding that they "had to take actions in terms of management changes." Gottstein also said Credit Suisse is cutting its exposure in its business and reviewing its "risk, controls and systems in that area."
Last month, the firm also made changes to its asset management business and suspended bonuses following the collapse of British supply chain finance firm Greensill Capital.
Gottstein won't resign
Gottstein also told CNBC that he wouldn't be resigning after the Greensill and Archegos matters. He said now is the "time for action, for remediation and to take the company to the next level." He also said it's the "time for solutions."
He admitted that Credit Suisse had a difficult first quarter due to those two incidents. Gottstein added that their operational performance during the quarter proved that their strategy was correct and that they are "on the right trac."
When asked if the bank's culture involved taking on too much risk, he said the bank doesn't have "a risk culture problem."
Credit Suisse said today that it had exited 97% of its trading positions connected to Archegos. It expects to report another loss of approximately 600 million Swiss francs in the second quarter.