Credit Suisse hit with S&P ratings cut on Archego ties

Shares have slumped by as much as 19% this week

More clouds are emerging for Credit Suisse Group AG after the bank’s outlook was cut due to the fallout from the unwinding of positions owned by Archegos Capital Management.

Shares of the Zurich-based lender slumped by as much as 4.82% Wednesday, extending the loss since news of the hedge fund's unwinding broke over the weekend to 19%.

S&P Global Ratings lowered its outlook on Credit Suisse to “negative,” suggesting that its A+ long-term credit rating could be cut, after the Zurich-based lender warned that the episode could have a “significant and material” impact on its first-quarter results. S&P affirmed all other credit ratings for the bank while cutting those outlooks as well.

“We believe Credit Suisse can manage potential financial losses due to its strong capitalization and robust underlying earnings, but the incident raises questions about the quality of risk management, the group's risk appetite, and adequacy of the risk return profile,” wrote Frankfurt-based analyst Anna Lozmann.


She added that the negative outlook reflects the view that “potential material losses” could occur. The ratings firm worries that the idea a single client could have such an impact may reveal other deficiencies within the group’s risk management system.

Credit Suisse was already facing questions about its risk management for its exposure to Greensill, a financial-services company that focused on supply chain financing that earlier in March filed for bankruptcy.

S&P Global expects to the risks to Credit Suisse will “remain contained,” however, the losses tied to Greensill and Archegos could “consume a material portion” of the bank’s 2021 results.

The analyst says the bank’s “strong capital buffer” should serve as a “second line of defense” versus adverse scenarios.


S&P Global warns that it could cut its ratings on Credit Suisse over the next 12 to 24 months should new risk management concerns arise or material new litigation risks are found, among other things.