Nomura and Credit Suisse have warned that they face significant losses over the sale of around $20bn in US and Chinese stocks, with the Japanese bank saying it could face up to $2bn worth of exposure to a US client.
Neither bank named the client in statements released this morning, but both said they faced sizable losses.
Hedge fund Archegos Capital Management, the family office of hedge fund manager Bill Hwang, is reportedly behind a $20bn firesale of assets on 26 March which are currently being unwound, and expected to rock markets this week.
Nomura’s share price has slid by nearly 17% since the announcement, which warned of a loss of $2bn due to a “significant loss arising from transactions with a US client”. The figure would represent around all of its profits gained in the second half of last year.
Credit Suisse, meanwhile, did not disclose a potential loss, but said it could be “highly significant and material to our first quarter results”. The loss would be a blow to the Swiss bank, which is already dealing with the fallout to its links with floundering financial services group Greensill Capital.
“A significant US-based hedge fund defaulted on margin calls made last week by Credit Suisse and certain other banks,” the bank said. “Following the failure of the fund to meet these margin commitments, Credit Suisse and a number of other banks are in the process of exiting these positions.”
Hwang’s New York-based firm is at the centre of a margin call that forced the liquidation of more than $20bn worth of shares on Friday, according to reports on Bloomberg and other media outlets. The firm had exposure to ViacomCBS and other Chinese technology companies that were hit hard last week.
Large investment banks provide prime brokerage services to hedge funds, which is a capital intensive business and potentially risky.
Nomura said that the $2bn estimate is “subject to change depending on unwinding of the transactions and fluctuations in market prices. Nomura will continue to take the appropriate steps to address this issue and make a further disclosure once the impact of the potential loss has been determined.”
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