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Morgan Stanley loses $911m in Archegos fiasco

AFP | Published: 22:34, Apr 17,2021

 
 

Morgan Stanley took a $911 million loss in the meltdown of Archegos Capital Management, the investment bank’s chief executive James Gorman said on Friday.

That makes Morgan Stanley the latest big bank caught up in the scandal that saw large financial institutions quickly unload shares held via complex instruments for Archegos, a company managing the family fortune of Bill Hwang.

The trigger for the massive sales seems to be a drop in the shares of ViacomCBS, a company to which Archegos had a large exposure.

The banks then demanded funds to cover the losses and, when Archegos could not provide them, seized its assets for sale.

Gorman said that the bank liquidated some large positions in late March ‘that resulted in a net loss of $644 million, which represents the amount the client owed us under the transactions that failed to pay us’.

The company opted to ‘de-risk’ its remaining positions ‘as rapidly as possible,’ he said, ‘and in so doing, incurred an incremental loss of $267 million.’

Other firms caught up in the bloodbath include Credit Suisse, which estimated a loss of about $4.7 billion.

Despite the losses, Morgan Stanley, like other banks, posted blockbuster quarterly profits, which more than doubled to $4 billion on revenue of $15.7 billion — a jump of more than 60 per cent.

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