S&P has downgraded its outlook on Credit Suisse as it attempts to recover from the collapse of Bill Hwang’s Archegos Capital Management after being amongst the most exposed banks.
S&P downgraded its outlook on Credit Suisse Group from stable to negative over the «quality of risk management» following the Archegos fallout. Still, the credit rating agency kept its BBB+ long-term rating for Credit Suisse's holding company and the A+ rating for its principal operating bank unit.
Archegos «raises questions about the quality of risk management, the group's risk appetite, and adequacy of the risk-return profile,» S&P's Anna Lozmann wrote.
Huge Hit Awaited
Other equity analysts parsed the financial damage from Archegos too: Berenberg Bank's Eoin Mullany put the hit at between $3 billion and $4 billion – an estimate shared by colleagues at J.P Morgan. Credit Suisse is likely to have to halt its ongoing 1.5 billion Swiss francs ($1.6 billion) share buyback, Mullany said, as did Citi analyst Andrew Coombs.
Goldman Sachs' Jernej Omahen wrote that Credit Suisse is likely to fundamentally review parts of its operations and that incidents like Archegos typically mark a move towards reducing risk appetite, raising the bar on new business, and on restructuring. The analyst said he is cutting his estimates for profit this year by 20 percent for every billion written off due to the issue.
Major Victims
Others that have been reportedly been hit include Japanese banks Nomura and Mitsubishi UFJ, which will book a $270 million loss, down from initial estimates of $300 million.
Deutsche Bank was potentially another major victim but it managed to emerge unscathed after it sold about $4 billion of holdings after Archegos defaulted on margin loans to buyers that include major European hedge fund Marshall Wace, according to a «Bloomberg» report citing unnamed sources.
