Credit Suisse lost to rival banks this year in winning new business for its prime brokerage arm after he lost $5.5 billion in credit to Bill Hwang’s Archegos family office and pledged to reduce its business risks.
Data compiled by Preqin for the Financial Times shows that as of 2021, Credit Suisse has won approximately 2.5% of new hedge fund clients served by prime brokers, lagging behind the 5.5% average of the past six years.
So far this year, Credit Suisse has signed 4 out of 156 new hedge funds for major banking services. According to data from Preqin, which tracks the alternative asset management industry, Credit Suisse has fallen from sixth in 2020 to ninth in 2021 in the list of major brokers for new hedge funds.
These data highlight the impact of the bankruptcy of Archegos in March on Credit Suisse, which manages the family wealth of former hedge fund manager Bill Hwang. Credit Suisse declined to comment.
In April of this year, Credit Suisse CEO Thomas Gottstein told investors that after Archegos’ loss, the bank’s brokerage and major financing businesses would “adjust the scale and reduce risk”.
“By the end of 2021, we plan to reduce the leverage exposure of investment banks by at least $35 billion and adjust risk-weighted assets to no more than the end of 2020 level,” Gottstein said.
The prime brokerage department caters to hedge funds and wealthy clients, providing a range of services, including stock lending, leverage, and transaction execution.
Completed on a large scale, it is considered one of the more profitable areas of investment banking.JPMorgan Chase analyst Kian Abouhossein estimates Credit Suisse’s income $900 million in revenue From the unit last year.
Several Wall Street banks including Goldman Sachs, Morgan Stanley and Nomura provided prime brokerage services for Archegos, but Credit Suisse suffered the most severe losses.
The bank said that the cost of selling Archegos-related stock was more than $5 billion. In contrast, Nomura lost nearly US$3 billion, Morgan Stanley suffered a loss of US$911 million, and Goldman Sachs was basically unscathed.
since then, Credit Suisse reorganized the leadership of its main brokerage department, According to the British “Financial Times” report in April, with the resignation of John Dabbs and Ryan Nelson. Credit Suisse Investment Banking Director Brian Chin and Chief Risk and Compliance Officer Lara Warner have also left the bank.