By Dhirendra Tripathi
Investing.com – Wells Fargo (NYSE:WFC) shares jumped 4% on Tuesday after a statement on its relationship with the troubled Archegos Capital calmed traders’ concerns.
The 169-year-old Wells Fargo said it had a prime brokerage relationship with Archegos Capital and that it no longer had any exposure and did not experience any losses.
Nomura (NYSE:NMR) and Credit Suisse (NYSE:CS) are among the major banks hit by their exposure to Archegos, the private investment office of former Tiger Asia manager Bill Hwang.
The Japanese investment bank has warned of a possible $2 billion loss, while Credit Suisse (SIX:CSGN) said a default on margin calls by a U.S.-based fund could be "highly significant and material" to its first-quarter results. Many had speculated Wells Fargo to be in that unfortunate list, as well.
Losses at Archegos sparked a fire sale of stocks that singed ViacomCBS (NASDAQ:VIAC), Discovery Class A (NASDAQ:DISCA), GSX Techedu (NYSE:GSX), Vipshop (NYSE:VIPS) and Farfetch (NYSE:FTCH) over last two trading sessions.
A Reuters report said Archegos was unable to meet banks' calls for more collateral to secure equity swap trades they had partly financed. After those positions fell sharply in value, lenders sold big blocks of securities to recoup what they were owed, Reuters said.