Finance

Archegos wipes off $6bn from top banks’ stock trading units in first quarter

The implosion of family office Archegos Capital wiped off more than $6bn from the world’s largest investment banks’ equities business, as stock trading units were at the sharp end of job cuts despite a surge in revenues in the first three months of the year.

The stock trading units of the 12 biggest investment banks would have made $17.7bn in the first three months of the year, an increase of 63%, according to analysis by research firm Coalition. However, the implosion of Bill Hwang’s family office, which rocked Wall Street and European banks with a $10bn margin call in March, means that gains shrunk to 6%, or $11.5bn in revenues.

READ UBS unveils $774m hit from Archegos Capital meltdown

Despite a record quarter for many, investment banks continued to trim frontline jobs. Stock trading units were hit by 300 job losses in the first three months of 2021, with European banks’ cuts offset by slight increases at their Wall Street rivals.

Credit Suisse has been hardest hit by Archegos’ collapse, with the Swiss bank taking $5.5bn in losses. It has cost senior executives their jobs including investment bank boss Brian Chin and chief risk officer Lara Warner.

However, UBS and Morgan Stanley also revealed surprise hits from the implosion of the family office in their first quarter results, while Japanese bank Nomura posted a $2.9bn loss.

READ Deutsche Bank rides Spac boom as investment bank profits surge by 134%

Investment banks’ revenues surged $62.9bn across the sector, a six-year high, according to Coalition. Advisory units were fuelled by a boom in so-called blank cheque companies, initial public offerings and a resurgence in mergers and acquisitions activity during the first three months of the year.

Equity underwriting starred in the first quarter, with special purpose acquisition companies hitting $96.1bn, which is already ahead of previous annual records, according to data provider Dealogic.

Recruitment of dealmakers has picked up in the first part of 2021, after most banks put a hiatus on hiring amid broader job cut freezes in the aftermath of the pandemic. Around 100 investment bankers were recruited in the first three months of the year – the first time headcount in the division has inched up since 2017.

To contact the author of this story with feedback or news, email Paul Clarke

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