MUFG securities unit to book US$270m loss on Archegos

[TOKYO] Mitsubishi UFJ Financial Group's securities arm will book a US$270 million loss after it closed all positions with a US client at the centre of a massive unwinding of leveraged bets that roiled a number of global banks.

The unit will book the hit, which is slightly lower than a previously estimated US$300 million, in next quarter's results, Japan's largest bank said in a statement Wednesday, without naming the client. The loss is linked to Bill Hwang's Archegos Capital Management, Bloomberg has reported.

Lenders are just starting to tally the carnage stemming from the liquidation of more than US$20 billion of positions linked to Mr Hwang's New York-based family office. The debacle has roiled stocks from Baidu to ViacomCBS and cast a spotlight on the opaque world of leveraged trading strategies. Nomura Holdings and Credit Suisse Group have both warned of "significant" losses in the wake of the selloff.

The loss could badly dent MUFG's European securities operations. The firm's London-based subsidiary, MUFG Securities EMEA, posted a profit of just US$116 million in 2019, according to the most recent filing available from the U.K. Companies House. Mitsubishi UFJ Securities reported pre-tax profits from the region of about US$154 million for the three quarters through December, a presentation shows.

MUFG said its profit for the fiscal year ending March 31 probably rose about 42% from a year earlier to 750 billion yen (S$9.1 billion). The bank lifted its annual net income forecast to 600 billion yen in November due to its strong overseas investment banking business. Profit totalled 528.1 billion yen a year earlier.

The higher estimate reflects net gains on equities along with windfalls from its investment in Morgan Stanley, it said.

MUFG said its dividend forecast has not been changed. The bank is scheduled to announce its full-year earnings on May 17. Shares closed down 3.9 per cent on Wednesday before the announcements.

BLOOMBERG