Friday 16 April 2021 2:48 pm

Morgan Stanley takes $911m hit from Archegos as quarterly profit jumps

Morgan Stanley’s profits have soared despite disclosing a near $1bn loss from the collapse of Archegos last month.

The collapse of the family office run by former Tiger Asia manager Bill Hwang came after it defaulted on margin calls, sparking billions of dollars in losses for Credit Suisse and Nomura.

Morgan Stanley was another leading bank which had exposure to the fund and initially lost $644m on stocks it held related to Archegos’ positions, which it sold.

Read more: Citigroup to exit 13 consumer markets despite tripling quarterly profit

It decided to “derisk” its remaining positions which cost them another $267m, chief executive James Gorman said. “I regard that decision as necessary and money well spent,” he added.

Regulatory scrutiny is mounting following Archegos’ collapse and the Senate Banking Committee is investigating the incident to understand why some banks were so exposed.

Despite Morgan Stanley’s exposure, quarterly net income rose to $3.98bn, or $2.19 per share, from $1.59bn, or $1.01 per share a year earlier.

Read more: JP Morgan profit soars on higher investment banking fees

The SPAC phenomenon which is taking global equity markets by storm pushed income higher like its rival Goldman Sachs. Global investment banking fees hit an all-time record of $39.4bn during the quarter, according to data from Refinitiv.

Net revenue soared 61 per cent to $15.72bn with investment banking revenue more than doubling to $2.6bn.

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