LONDON – UBS surprised market participants Tuesday by announcing that the Archegos Capital saga had taken a profit almost a month after the US hedge fund collapsed.
The Swiss bank waited until its results day to let the markets know about its involvement in the company. This has raised questions about transparency in the industry.
“What surprises me here is the fact that they didn’t announce this sooner,” Storm Uru, manager at Liontrust Global Dividend Fund, told CNBC’s “Squawk Box Europe” on Tuesday.
UBS shares fell nearly 3% in European trading this morning after it was reported that it hit $ 774 million in the first quarter due to the Archegos default.
Maria Rivas, senior vice president at DBRS Morningstar, said UBS’s announcement was “surprising given that the bank had not given the market any advice on the matter before”.
Various banks were hit by the Archegos collapse, taking too much risk and defaulting on margin calls in March.
We take it very seriously.
Credit Suisse, Nomura, Deutsche Bank, Morgan Stanley and Goldman Sachs have been caught in the crossfire, although some were able to leave their positions earlier than others.
For Credit Suisse, for example, its stake in Archegos meant a success of CHF 4.4 billion ($ 4.8 billion), which had a significant impact on the bank’s performance in the first quarter of the year.
Credit Suisse also expected an additional loss of around CHF 600 million in the second quarter last week.
“UBS took a similar approach to Morgan Stanley and reported the impact on the results announcement,” said Rivas.
Morgan Stanley was one of the banks mentioned that quickly sold their exposure to Archegos. However, two weeks ago, losses of $ 644 million were reported due to a “credit event” and related trading losses of $ 267 million.
“While unexpected, the failure of the Prime Brokerage client caused UBS to depress overall investment banking performance, but the impact was more than offset by strong revenue development,” added Rivas.
UBS CEO Ralph Hamers spoke to CNBC’s Joumanna Bercetche on Tuesday that the bank was “very disappointed” with the success.
“We take this very seriously. We have started a very detailed review of the various prime broker relationships, the relationship with family offices and the risk management processes that we have to really get the lessons learned and make sure we use them implement it so it doesn’t happen again in the future, “he said.
Other banks are also investigating what went wrong with Archegos.
Liontrust’s Uru, who said it has no UBS stakes, believes that further transparency in the future could end some problems in banking. “This has clearly had an impact on UBS and if we move forward on the basis of greater governance transparency, we may not have these issues,” he said.
