Archegos failure wipes off $434m in UBS Q1'21 net profit

On the 04/27/21 at 7:55AM


Adrien Paredes-Vanheule

UBS's chief executive officer Ralph Hamers said a detailed review of the firm's relevant risk management processes is underway following the Archegos Capital Management rout.

Swiss financial group UBS has recorded a net profit attributable to shareholders of $1.82bn (€1.5bn) for the first quarter of 2021, up 14% year-on-year, with diluted earnings per share of $0.49 (€0.40), it said on Tuesday. However, the recent failure of Bill Hwang’s family office Archegos Capital Management has taken a toll on UBS’s net profit like it did at other groups. Without naming the firm, UBS said the default by a US-based client of its prime brokerage business resulted in an impact on net profit attributable to shareholders of $434m (€359.4m).

“The related loss in operating income of $774m (€640.9m) was recognized 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. We have exited all remaining exposures in April 2021, with related losses recognized in the second quarter of 2021 which are immaterial for the group,” the firm explained.

Ralph Hamers, chief executive officer of UBS, said the teams are “all clearly disappointed and are taking this very seriously.” He unveiled a detailed review of the group's relevant risk management processes is underway while appropriate measures are being implemented to prevent similar situations to occur in the future. “Our investment bank fully absorbed this loss, yet still delivered a 13% return on attributed equity, which would have been in excess of 30% had it not been for this incident,” Hamers commented.

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