Credit Suisse suffers 'highly significant' loss from US hedge fund

Credit Suisse warned Monday of a “highly significant” hit to its first-quarter results, after it began exiting positions with a large U.S. hedge fund that defaulted on margin calls last week, CNBC reports.

In a trading update before the market open, the Zurich-based lender said a number of other banks were also affected and had begun exiting their positions with the unnamed firm.

Credit Suisse shares tumbled by 10 percent at the open following the announcement.

“While at this time it is premature to quantify the exact size of the loss resulting from this exit, it could be highly significant and material to our first quarter results, notwithstanding the positive trends announced in our trading statement earlier this month,” Credit Suisse said.

The bank added that it would provide a further update on the matter “in due course.”

A margin call occurs when a broker demands that an investor deposits more money into a margin account (which enables them to invest money borrowed from the broker) to bring it to a minimum required amount. The investor then has to either deposit into the account, or sell some of the assets held in it.

Nomura also issued a trading update on Monday warning of a “significant loss” at one of its U.S. subsidiaries resulting from transactions with a client stateside. Japan’s largest investment bank said it was evaluating the potential extent of the loss, estimated at US$2 billion.

Its shares fell by 16 percent on Monday.

“This estimate is subject to change depending on unwinding of the transactions and fluctuations in market prices,” the bank said.

“Nomura will continue to take the appropriate steps to address this issue and make a further disclosure once the impact of the potential loss has been determined.”

It comes as Archegos Capital Management was forced to liquidate positions at the end of last week. The moves by the multibillion dollar U.S. family office, founded by former Tiger Management equity analyst Bill Hwang, caused a wave of selling pressure on Friday, with U.S. media stocks and Chinese internet ADRs taking the brunt.