Credit Suisse Group AG’s double-barreled financial crisis shares a common theme: a bank that looked the other way when warning signs argued for pulling back on lucrative corners of its business.
The Swiss bank with a big Wall Street presence was caught off guard starting in late February when $10 billion in complicated investment funds it ran with financing firm Greensill Capital unraveled, despite years of internal warnings about the relationship.
Then it lent more than other banks on big, concentrated positions to Archegos Capital Management, run by longtime client Bill Hwang. Though Archegos was flagged as a client of special interest, Credit Suisse acted more slowly than other banks, and ended up on the wrong side of a fire sale.
The bank said Tuesday it would take a $4.7 billion charge on the Archegos trade, equivalent to more than a year’s worth of profit. While it hasn’t put a number on the Greensill damage, a preliminary assessment inside the bank says losses to Credit Suisse investors may hit $1.5 billion, according to a person familiar with the bank.
In a statement Tuesday, Credit Suisse Chief Executive Thomas Gottstein said, “We are fully committed to addressing these situations. Serious lessons will be learned.”