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Morgan Stanley Lost Nearly $1 Billion on Archegos, But Pulled Out Q1 Win

Stock MarketsApr 16, 2021 09:28AM ET
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© Reuters.

By Dhirendra Tripathi

Investing.com – Morgan Stanley (NYSE:MS) on Friday reported a $911 million loss owing to its exposure to Archegos, the family office of former hedge fund manager Sung Kook ‘Bill’ Hwang.

The investment bank recorded a credit loss of $644 million and a trading loss of $267 million relating to “a single prime brokerage client," which Morgan Stanley later identified as Archegos on a conference call with analysts, Reuters reported.

Archegos was heavily exposed to ViacomCBS Inc (NASDAQ:VIAC) and stocks of other media companies including Discovery (NASDAQ:DISCA). As the stocks tumbled last month, there were margin calls and when Hwang could not meet the demand of his brokers like Credit Suisse (SIX:CSGN) and Nomura, they resorted to selling those shares. Some of these brokers also acted as lenders to Archegos.

Credit Suisse Group (NYSE:CS) will record an estimated $4.7 billion loss related to Archegos, and Nomura Holdings Inc ADR (NYSE:NMR) will have a $2 billion loss, Reuters has reported.

Morgan Stanley shares fell 0.8% on Friday, after reporting first quarter results that handily beat expectations.

Morgan Stanley’s performance, much like its peers, was driven by profits at its trading and investment banking units at a time when many stocks have touched all-time highs and M&A activity has been intense.

The bank reported net revenues of $15.7 billion for the first quarter ended March 31 compared with $9.8 billion a year ago. Net income was $4.1 billion, or $2.19 per diluted share, as against $1.7 billion, or $1.01 per diluted share in the same period a year ago.

Morgan Stanley Lost Nearly $1 Billion on Archegos, But Pulled Out Q1 Win
 

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