Morgan Stanley performs well despite nearly $ 1 billion in Archegos-related losses

Morgan Stanley performs well despite nearly $ 1 billion in Archegos-related losses

Posted on Apr 16, 2021, 7:01 PM

In the Archegos fund debacle, Morgan Stanley fared better than others… but the American giant still left some feathers. The US bank on Friday announced a loss of nearly $ 1 billion linked to the fall of the hedge fund that had defaulted on margin calls. Its quarterly profit, however, continues to rise sharply.

Morgan Stanley is one of six banks exposed to the woes of the Archegos investment fund. When unwinding its positions, it initially lost $ 644 million, before deciding to unwind its remaining positions, which resulted in another loss of $ 267 million, said Morgan Stanley chief executive James Gorman. , during a conference call with analysts. “I consider this decision necessary and the money well spent”, he added.

With these $ 911 billion in woes, Morgan Stanley is doing relatively well compared to others. Among its rivals, those who were slow to shake off their positions paid a heavy price. The institutions most affected by the collapse of Bill Hwang’s fund remain Credit Suisse, with $ 4.7 billion in losses, and the Japanese bank Nomura, with $ 2 billion. Goldman Sachs, for its part, escaped virtually unscathed, citing only a “negligible” impact on its accounts. If the massive sales of securities linked to Archegos have not had a systemic consequence so far, this new case is attracting the attention of regulators.

The US bank’s net profit reached $ 3.98 billion. Net banking income, for its part, jumped 61% compared to the first quarter of 2020, reaching $ 15.72 billion. Income from wealth management and investment banking grew by 47% and 90% respectively in one year. Like its counterpart Goldman Sachs, Morgan Stanley has benefited in particular from the rebound in the stock markets and investor enthusiasm for SPACs.

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