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Portfolio > Asset Managers

Credit Suisse Denies Rumors About Selling Asset Management Unit

By Bernice Napach

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What You Need to Know

  • Credit Suisse has lost billions of dollars to two separate entities — the family office Archegos and the supply chain finance company Greensill.
  • The bank could sell the unit, which has about $1.7 trillion in assets, to raise money.
  • BlackRock and State Street declined to comment on rumors they were interested.

Speculation is growing about which asset managers could be interested in acquiring the asset management business of Credit Suisse, which lost $4.7 billion in loans to the now defunct New York-based family office Archegos Capital Management.

But Credit Suisse “has no plans to sell any parts or all of its Asset Management business,” said a Credit Suisse spokesperson. The bank’s asset management division has $476.8 billion in assets, according to a bank spokesperson.

Among the names of firms said to be interested in the bank’s asset management business, according to Reuters, are BlackRock, State Street, DWS and a special purpose acquisition company (SPAC) called Pegasus Europe, formed by former UniCredit CEO Jean-Pierre Mustier and French billionaire Bernard Arnault, CEO of LVMH Moet Hennessy Louis Vuitton. Reuters cited three sources speaking anonymously.

BlackRock, State Street and DWS had no comment on the rumors, and Pegasus Europe could not be reached.

Archegos, Greensill Fallout

Credit Suisse is in need of money. In addition to the billions in dollars in losses due to Archegos Capital Management, the Swiss-based bank faces additional losses related to $10 billion it invested in loans from Greensill Capital, a U.K.- and Australia-based company that provided short-term loans to companies to pay their suppliers. Greensill collapsed after filing for bankruptcy and losing the insurance it needed to back the billions in loans it made to businesses.

Credit Suisse has liquidated $10 billion in supply-chain investment funds connected to Greensill, has launched two separate external investigations — one into Greensill and the other into Archegos — announced it would be taking a 900 million Swiss franc charge due to these losses (about $976 million) and cut its dividend. Since mid-March, its stock has dropped about 25%.

Asked on “60 Minutes” Sunday about Credit Suisse’s losses due to Archegos, Fed Chairman Jerome Powell said was concerned and surprised that “a single customer client” at a large banking institution “could result in such substantial losses” in a business that is generally thought to understand risks.

He called it a “risk management breakdown” since unbeknownst to Credit Suisse Archegos Capital had entered into stock-related derivatives contracts with several banks. When the prices of stocks they were tied to fell, the banks called on Archegos to put up more money, which it didn’t have, so it had to liquidate positions.

The Fed chief said the central bank is “determined to understand what happened [with Archegos Capital] and make sure that it doesn’t happen again.”

(Photo: Bloomberg)

Bernice Napach

@Think_Napach

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