Credit Suisse outlook cut to negative by S&P as bonds tumble
It is potentially facing the biggest losses among the major banks in Archegos' unwinding of positions
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S&P Global Ratings downgraded its outlook on Credit Suisse Group to negative from stable, as the fallout from the Archegos Capital Management crisis impacts the Swiss bank's debt and shares.
Credit Suisse is one of the most exposed banks to the family office of former hedge fund manager Bill Hwang, with potential losses from the unwinding of positions running into billions of dollars, said people with knowledge of the matter.
The numerous lenders involved may see total losses in the range of US$5-10 billion, said JPMorgan Chase & Co.
"The incident raises questions about the quality of risk management, the group's risk appetite, and adequacy of the risk return profile," the ratings agency said in a statement on Tuesday. S&P kept its BBB+ long-term rating for Credit Suisse's holding company and the A+ rating for its principal operating bank unit.
The Archegos hit is the latest in a series of write-downs and scandals for Credit Suisse chief executive officer Thomas Gottstein that seem to occur at ever shorter intervals. The bank is also gauging the financial impact of the Greensill Capital collapse earlier this month.
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Credit Suisse fell about 2 per cent as of 10.10am in Zurich trading on Wednesday, taking its losses for the week to about 18 per cent after the bank had warned that it faces "highly significant" losses related to Archegos. Its bonds also tumbled on Tuesday and the cost to protect its debt against default climbed to the highest since mid-2020. The spread over Treasuries for the Swiss bank's
4.875 per cent US dollar bonds due in 2045 widened 8.5 basis points, among Tuesday's worst performances in the investment-grade market, said Trace.
While Credit Suisse's impact from Archegos also has yet to be fully determined, it is potentially facing the biggest losses among the major banks from the unwinding of positions, along with Japanese lender Nomura Holdings.
Mitsubishi UFJ Financial Group has also flagged losses, though other lenders to the family office - such as Goldman Sachs Group and Deutsche Bank - cut their exposure with no or only immaterial damage. BLOOMBERG
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