Credit Suisse takes $4.7bn hedge fund hit

Credit Suisse said on Tuesday that it had taken a $4.7 billion (€3.9bn) hit from its links to troubled hedge fund Archegos Capital Management, cut dividends and announced the departure of two senior executives.

The Swiss bank and Japan’s Nomura warned last month that they could face significant losses due to their exposure to a US hedge fund forced to liquidate its holdings. “The significant loss in our Prime Services business relating to the failure of a US-based hedge fund is unacceptable,” CEO Thomas Gottstein said in statement on Tuesday.

Bloomberg News has reported that the fund was little-known Archegos Capital Management, which sold more than $20 billion in stocks from US media and Chinese companies as it sought to cover its obligations to its lenders.

Credit Suisse said its pre-tax loss of 900 million Swiss francs in the first three months of the year includes 4.4 billion Swiss francs (€3.9bn) related to “the failure by a US-based hedge fund to meet its margin commitments as we announced on March 29”.

Trading on margin is the practice of using borrowed funds to invest in financial assets such as stocks. It can be very profitable for borrowers as they are often only...