LONDON — UBS shocked market members on Tuesday, asserting that earnings had taken a hit from the Archegos Capital saga — nearly a month after the collapse of the U.S. hedge fund.
The Swiss financial institution waited till its outcomes day to inform markets about its publicity to the agency, a transfer that has sparked questions on transparency within the business.
“What I am surprised about here is the fact that they didn’t disclose this earlier,” Storm Uru, a supervisor at Liontrust Global Dividend Fund, informed CNBC’s “Squawk Box Europe” on Tuesday.
UBS shares dropped by nearly 3% in mid-morning European commerce, after reporting that it took a $774 million hit within the first quarter as a results of Archegos’ default.
Maria Rivas, senior vice chairman at DBRS Morningstar, mentioned the announcement from UBS “was surprising given that the bank had not made any indication to the market on this issue before.”
Different banks have been hit by the collapse of Archegos, which took on an excessive amount of threat and defaulted on margin calls in March.
Credit Suisse, Nomura, Deutsche Bank, Morgan Stanley and Goldman Sachs have been caught within the crossfire, though some managed to exit their positions prior to others.
For Credit Suisse, as an example, its involvement in Archegos meant it took a hit of 4.4 billion Swiss francs ($4.8 billion), which considerably impacted the financial institution’s efficiency within the first quarter of the yr.
Credit Suisse additionally mentioned final week that it expects to take a further loss within the second quarter of round 600 million Swiss francs.
“UBS took a similar approach to Morgan Stanley and reported the impact on the announcement of results,” Rivas mentioned.
Morgan Stanley was among the many named banks that rapidly offered their publicity to Archegos. Nonetheless it reported two weeks in the past a $644 million loss from a “credit event,” as nicely as $267 million in associated buying and selling losses.
“Whilst unexpected, UBS hit from the prime brokerage client default dragged the overall Investment Banking division performance down, but the impact was more than offset by strong revenue performance,” Rivas added.
Speaking to CNBC’s Joumanna Bercetche on Tuesday, UBS CEO Ralph Hamers mentioned the financial institution was “very disappointed” by the hit.
“We are taking it very seriously. We have started a very detailed review of the different prime brokers’ relationships that we have, the family offices’ relationship that we have as well, the risk management processes that we have, in order to really get the lessons learned and make sure we implement them so that going forward it doesn’t happen again,” he mentioned.
Other banks are additionally investigating what went unsuitable with Archegos.
Uru, from Liontrust, believes additional transparency sooner or later may put an finish to among the points in banking. “Clearly this had had an impact on UBS and maybe as we move forward based on stronger governance transparency, maybe we won’t have these issues,” he mentioned.
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