Morgan Stanley takes $911m hit from Archegos collapse

Morgan Stanley booked a $911m loss within its equities unit on losses related to a single client, the latest large investment bank to reveal a hit in the unit after the collapse of hedge fund Archegos Capital.

Despite posting a 17% rise in revenues within its equities trading business, which houses its prime broking unit, Morgan Stanley said its numbers included a $644m loss “related to a credit event for a single prime brokerage client”, and a subsequent $267m trading loss.

The client was Archegos Capital, a person familiar with the matter said. Bloomberg reported this first.

READ Goldman Sachs CEO says he’s pleased with ‘prompt action’ in Archegos firesale

On a call with analysts, Morgan Stanley chief executive James Gorman said that its prime broking unit was a “gem of a business” and it would not be making any fundamental changes, describing the Archegos loss as “done and history”. He added that the bank did not disclose the loss previously as the equities business was having a “record quarter”.

“We’ll certainly be looking hard at family office-type relationships where they are very concentrated and you have multiple prime brokers,” he said. “Frankly, the transparency and lack of disclosure relating to those institutions is just different from the hedge fund institutions. That’s something I’m sure the SEC is going to be looking at and that’s probably good for the whole industry.”

Gorman added that the bank was underwriter on a security related to the Archegos loss, which delayed a sell off. “The right thing to do was to close that previous underwriting, which happened on that Friday [26 March], so we had to hold off,” he said.

Credit Suisse has lost $4.7bn from the implosion of Archegos, the family office of former Tiger Asia manager Bill Hwang, which rocked global markets when it unwound around $20bn in positions in prominent tech firms. Nomura revealed it made a $2bn loss from a single prime broking client, believed to be Archegos.

Japanese bank MUFG took a $300m hit, while Mizuho also unveiled $90m a loss from the hedge fund’s collapse. However, both Goldman Sachs and Morgan Stanley reportedly moved swiftly to offload blocks of assets connected to the former Tiger Asia manager Hwang, walking away with immaterial losses.

Goldman Sachs boss David Solomon said on 14 April that the bank took “prompt action” to limit losses from Archegos and that he was pleased with the bank’s response.

Credit Suisse faces difficult questions over the incident, and has already ousted key executives including chief risk officer, Lara Warner, is leaving the bank as a result of the incident, and Brian Chin, the chief executive of its investment bank, who was replaced with former Bank of America corporate and investment banking head, Christian Meissner.

To contact the author of this story with feedback or news, email Paul Clarke

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