UBS Joins Morgan Stanley With Surprise $861 Million Archegos Hit
Marion Halftermeyer, 27 April 2021
UBS Group AG disclosed an $861 million hit from the implosion of Archegos Capital Management and vowed to improve risk management, joining Morgan Stanley in blindsiding investors who’d been kept in the dark for weeks about the size of the losses.
The loss, mostly booked in the first quarter, overshadowed a better-than-expected profit, with strong performance in the key wealth management business. Chief Executive Officer Ralph Hamers said while the bank will require more transparency from clients to prevent such losses in the future, he defended the business with hedge funds as “strategic” and said he had no plans to follow rival Credit Suisse Group AG in cutting back lending.
“Clearly, we are very disappointed at this situation,” he said in an interview with Bloomberg TV. “We are reviewing the different prime brokerage relationships, as well as the GFO — the family office relationships.”
Switzerland’s largest bank had remained quiet on the collapse of Bill Hwang’s family office for weeks, even as Credit Suisse unveiled a $5.5 billion hit and Japan’s Nomura Holdings Inc. also warned of steep losses. While Goldman Sachs Group Inc., JPMorgan Chase & Co. and Wells Fargo all managed to limit or avoid damage, Morgan Stanley was criticized by some investors and analysts for revealing a $911 million loss only during its earnings this month.
Nomura Takes $2.3 Billion Hit on Archegos, Exits Most Positions
UBS fell as much as 4% in Zurich trading, leading European bank stocks lower, as investors digested the Archegos impact, which the bank had considered not material enough to disclose earlier.
The “Archegos losses have taken the shine of these results,” JPMorgan analysts Kian Abouhossein and Amit Ranjan wrote in a note.
