This is How A lot Morgan Stanley Misplaced When Archegos Blew Up 

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Morgan Stanley

might have posted document first-quarter outcomes, however it additionally posted a large loss from the blowup of Archegos Capital final month.

Morgan Stanley (ticker: MS) incurred a lack of $911 million tied to Archegos–$644 million of which was tied to the household workplace’s incapability to satisfy a margin name and an $267 million that was incurred because the financial institution labored to shortly unwind the remainder of its publicity to the fund.

Going into earnings, Morgan Stanley was thought to have emerged from the Archegos battle comparatively unscathed, because it was believed to be one of many first of Archegos’ prime brokers to unwind its positions.

Goldman Sachs Group

(GS) additionally moved swiftly, avoiding large losses, whereas

Credit score Suisse Group

(CS) didn’t fare as nicely, transferring slower and posting a $4.7 billion loss.

Analysts peppered Morgan Stanley CEO
James Gorman
with questions on Archegos throughout Friday’s earnings name, asking why the financial institution didn’t disclose the losses earlier, as different banks had. He defined that the financial institution knew that even with the Archegos loss, it might nonetheless be posting a document quarter.

“The equities enterprise the place this resided was having a document quarter. So that you’ve obtained to be at a degree the place it’s materials to the general quarter, and I’ll depart that as much as the attorneys,” Gorman stated.

Morgan Stanley was additionally an underwriter of

ViacomCBS

(VIAC), which was finishing a secondary providing. The financial institution felt it was finest to finish the underwriting earlier than clearing up the Archegos state of affairs, which made it troublesome to unwind its positions as shortly as it might have favored.

“We needed to maintain off, which induced us to be later than some, if you’ll,” Gorman stated. “And the rationale for that was not that we weren’t conscious of what was occurring, we simply felt we had an underwriting obligation to cope with.”

Even with the Archegos state of affairs largely behind it, questions nonetheless stay in regards to the dangers banks’ prime brokerage desks take, in addition to the dearth of regulatory disclosure household workplaces have to offer. Archegos maintained equally leveraged positions at a number of banks, amounting to a reported $30 billion of positions for a agency that managed roughly $10 billion.

“Frankly, the transparency and lack of disclosure regarding [family offices] is simply totally different from the hedge fund establishments. And that’s one thing I’m positive the SEC goes to be , and that’s most likely good for the entire trade,” Gorman stated.

Even so, Gorman defended the financial institution’s continued enterprise with household workplaces.

“Let’s not throw the newborn out with the bathwater right here,” he stated. “This isn’t a judgment name on household workplaces. It is a very idiosyncratic occasion.”

Morgan Stanley inventory was down 0.7%, at $80.29, in latest buying and selling. The

S&P 500

was up 0.2%.

Write to Carleton English at [email protected]