Looks like the number of victims of the Archegos Capital fallout did not stop at Credit Suisse, Morgan Stanley and Nomura. The latest casualty was yet another Swiss Bank and that is UBS.
The financial institution on Tuesday reported a loss of $774 million in revenue due to the default by the Archegos Capital. The investment bank reported a net income of $1.8 billion for the first quarter of 2021 despite the Archegos Capital fallout.
Meanwhile, UBS also revealed that it had exited all exposure to Archegos and any related losses in the second quarter would be immaterial for the group.
Commenting on Archegos Capital exposure, UBS CEO Ralph Hamers in a note, stated, “However, our first quarter results also factored in a loss related to the default by a single US-based prime brokerage client. We are all clearly disappointed and are taking this very seriously.”
The net income of the lender for the first quarter increased by 14 per cent year-on-year. The default by a US-based client of our prime brokerage business resulted in an impact on first quarter of 2021, Group net profit of $434 million. “The related loss in operating income of $774 million was recognised within the financing business in the Investment Bank, which provided prime brokerage services to the client, and arose as a result of closing out a significant portfolio of swaps with the client following the default and the unwinding of related hedges,” the bank stated.
The group profit before tax (PBT) for the first quarter of 2021 was $2,298 million (up 14 per cent YoY), including net credit loss releases of $ 28 million.
Commenting on the pandemic, the lender said that investor sentiment remained positive in the first quarter of 2021, helped by the strong rebound in economic activity and greater optimism regarding the further recovery, supported by mass COVID-19 vaccination campaigns around the globe. “However, economic, social, and geopolitical tensions remain, raising questions around the sustainability and shape of the recovery. Persistently high numbers of COVID-19 infections and hospitalizations, as well as lockdowns and similar measures imposed to control the pandemic, add to these existing concerns, as well as the severity and duration of the effects of the pandemic in certain economic sectors.”