Receiving Wide Coverage ...
It could have been worse
Credit Suisse, which has already acknowledged losing $4.7 billion in the Archegos Capital Management debacle, “amassed more than $20 billion of exposure” to the failed investment firm, The Wall Street Journal reported. “The bank struggled to monitor [the situation] before the fund was forced to liquidate many of its large positions. The U.S. family investment firm’s bets on a collection of stocks swelled in the lead-up to its March collapse, but parts of the investment bank hadn’t fully implemented systems to keep pace with Archegos’s fast growth.”
“The exposure reveals for the first time the scope of Credit Suisse’s relationship with Archegos, which unraveled late last month. Credit Suisse CEO Thomas Gottstein and Chief Risk Officer Lara Warner, who recently departed the bank, only became aware of the bank’s exposure to Archegos in the days leading up to the forced liquidation of the fund. Neither Mr. Gottstein nor Ms. Warner had been aware of the fund as a major client before that.”
Credit Suisse said Thursday that it would lose an additional $655 million in the second quarter due to Archegos and that it plans to raise about $2 billion in new capital. At the same time, Switzerland’s financial regulator, Finma, said it has opened enforcement proceedings against the bank, the Journal reported. Financial Times New York Times
Wall Street Journal
Mixed bag
Banks in the auto loan business are being pulled in opposite directions by supply chain problems. “Dealers typically borrow to finance their floor inventory. So when they can’t get cars, and the cars they do get immediately zoom off the lot, that hurts banks’ loan growth.”
But those same issues “have also been an accelerant for used-car prices as buyers scramble to find vehicles—and, in turn, for auto lenders. Banks are relatively bigger players in used-car loans than new-car loans. Used-car loans generally have higher yields. And car loans get a further boost because any defaulted debts have better recovery values due to higher values for the collateral. With a possible looming economic boom, growing demand for electric vehicles, and potential demographic shifts away from big cities and public transit, auto lenders likely still have fuel left in the tank.”
Financial Times
Staying the course
HSBC Chief Executive Noel Quinn said the bank will not “flip-flop on strategy every time there is a flare-up in tensions between Beijing and the west, rebuffing criticism of the bank for moving closer to China as it cracks down on Hong Kong. Europe’s largest bank is being used as a political piñata, trapped between two superpowers in an increasingly belligerent confrontation that shows little sign of abating under U.S. President Joe Biden.”
“We’ve been in that role for 156 years,” Quinn told the FT. “You’re cognizant of those tensions, you try to manage them to the best of your ability, but you can’t redraw the core strategy of the bank based on what is a relative moment in time. We’re not a political organization and we don’t want to be. We operate in 60 countries around the world and we’re a guest in most . . . I don’t look at it from a nation state perspective. I look at it from a customer-by-customer perspective.”
Cash & carry
Employees of Wirecard, the defunct German payments company, “hauled millions of euros of cash out of the group’s Munich headquarters in plastic bags over a period of years, according to former employees, suggesting that the payments company was looted even more brazenly than previously known.”
Tone deaf
JPMorgan Chase has some “reputational damage” to repair after the proposed European soccer Super League was jettisoned just days after it was announced, an FT op-ed says. The bank had agreed to put up about $4 billion to finance the venture.
New York Times
Reinforcements at JPMorgan
JPMorgan Chase “announced policies aimed at improving working conditions amid record deal volume and an industrywide debate about banker burnout, especially in the junior ranks. JPMorgan is bringing on more workers to help cope with heavy deal volume. It has already hired 65 analysts and 22 associates this year and plans to add another 100 junior bankers and support staff, ‘if we can find them, as quickly as we can,’ ” according to co-head of investment banking Jim Casey.
“It’s also focused on managing its bankers’ hours better. JPMorgan will tell associates not to do marketing work on weekends. It will encourage all bankers to go home by 7 p.m. on weekdays and add more flexibility for personal time. It will force bankers to take at least three weeks of vacation a year. It will require group heads to call two to three junior bankers every day to find out what is working.”
