Morgan Stanley disclosed Friday it lost $911 million during the first quarter due to a “single prime brokerage client.” That client was Archegos Capital Management, a person familiar with the matter told CNN Business.
Morgan Stanley (MS) was among the many banks that lent Archegos vast sums of money before its collapse last month. However, it avoided the more dramatic losses suffered by peers like Credit Suisse (CS), which lost $4.7 billion.
“I’m very pleased with how the institution came together and responded to this very complex situation,” Morgan Stanley CEO James Gorman said during a conference call Friday.
Despite the losses, Morgan Stanley managed to report record revenue and profit during the quarter.
Gorman said the bank liquidated “very large” single stock positions late in March, fire sales that cost it $644 million.
The Morgan Stanley boss said a “management decision" was made to "completely de-risk” the remaining smaller positions, causing another $267 million in losses.
“We decided we would be out of the risk as rapidly as possible,” Gorman said. “I regard that decision as necessary and money well spent.”
The broader question is how a little-known firm, run by an executive with a checkered past, was able to amass such risky positions in the first place. Archegos's structure as a family office, a type of firm with limited transparency requirements, played a role.
Gorman said he thinks disclosure rules "made it more difficult to understand exactly who is holding what where.”