Tuesday 27 April 2021 9:07 am

UBS takes unexpected $774m Archegos hit

UBS reported a surprise $774m hit following the collapse of U.S. investment fund Archegos, taking the shine off a forecast-beating 14 per cent rise in quarterly net profit.

The news comes as losses from Archegos are still rippling across the global banking industry, with Japan’s Nomura posting on Tuesday its biggest quarterly loss in over a decade as a result of its dealings with the stricken fund.

“We are all clearly disappointed and are taking this very seriously,” UBS chief executive Ralph Hamers said of the loss in its prime brokerage business related to the U.S. client’s default. While the client was not named, it is widely understood to be Archegos.

“A detailed review of our relevant risk management processes is underway and appropriate measures are being put in place to avoid such situations in the future,” he said.

UBS shares were down two per cent when the Swiss Stock Exchange opened this morning.

The bank, which has hitherto received little scrutiny over its involvement in Archegos and had previously declined to comment on any related positions, said the revenue hit to its prime brokerage business had reduced net profit by $434m in the first quarter.

Still, net profit of $1.824bn for the first three months of 2021 overshot median expectations for $1.591bn in a poll of 20 analysts compiled by the bank.