Morgan Stanley had $911 million in first-quarter losses tied to Archegos fund meltdown

Invoice Hwang, founding father of Tiger Asia Administration LLC, exits federal court docket in Newark, New Jersey, U.S., on Wednesday, Dec. 12, 2012.

Emile Warnsteker | Bloomberg | Getty Pictures

Morgan Stanley posted blockbuster outcomes for the primary quarter, however a single prime brokerage shopper value the agency practically $1 billion.

The agency had a $644 million loss from a “credit score occasion” for that shopper, in addition to $267 million in associated buying and selling losses, the New York-based financial institution stated Friday in first-quarter earnings outcomes that handily exceeded analysts’ expectations for the quarter.

That shopper was Invoice Hwang’s Archegos, in response to an individual with direct information of the matter, who added that the financial institution had no extra publicity to the fund collapse.

Throughout his scheduled name with analysts to debate the quarter, Morgan Stanley CEO James Gorman confirmed the shopper was Archegos and stated the fund owed it $644 million after its meltdown in late March.

“We liquidated some very giant single inventory positions by means of a sequence of block gross sales culminating on Sunday night time, March 28,” Gorman stated. “That resulted in a internet lack of $644 million which represents the quantity the shopper owed us below the transactions that they didn’t pay us.”

He added: “Subsequently, we made a administration choice to fully de-risk the remaining smaller lengthy and quick positions,” Gorman stated. “We determined we’d be out of the chance as quickly as doable, and in so doing, incurred an incremental lack of $267 million.  I regard that call as vital and cash nicely spent.”

Later, an analyst requested Gorman if the episode would change their method to danger administration within the prime brokerage enterprise.

“I believe we’ll actually be wanting exhausting at household office-type relationships the place they’re very concentrated and you’ve got a number of prime brokers and albeit, the transparency and lack of disclosure regarding these establishments is simply completely different from the hedge fund establishments,” Gorman stated. “That is one thing I am certain the SEC goes to be taking a look at and that is in all probability good for the entire business.”

This story is creating. Please verify again for updates.

With help from CNBC’s Daybreak Giel.

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