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Wells Fargo Had Exposure to Archegos Capital, but Didn't Take Any Losses

By Bram Berkowitz - Updated Mar 30, 2021 at 1:56PM

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The bank made five block trades as part of the multibillion-dollar margin call on Archegos.

Wells Fargo (WFC 5.78%) had exposure to the fallout from Archegos Capital Management, but didn't take any loses. The bank made five block trades on Monday valued at more than $2 billion, including trying to sell 18 million shares of ViacomCBS (PARA 2.71%), which is one of the companies Archegos had exposure to.

"We were well collateralized at all times over the last week and no longer have any exposure," the bank said in a statement, adding that it had a prime brokerage relationship with the family office run by former Tiger Asia manager Bill Hwang.

Last week, multiple lenders hit Archegos with a multibillion-dollar margin call, which forced it to put up more collateral to its lenders. When it couldn't, lenders sold big blocks of Archegos' equity positions to try to recoup what they were owed.

Several other investment banks had exposure to Archegos, and total global losses could be $6 billion among the various lenders.

Picture of Wells Fargo branch.

Image source: Wells Fargo.

This morning, analysts at J.P. Morgan said they were surprised by Wells Fargo's involvement, and worried about the regulatory consequences of it.

"Our key concerns for Wells Fargo are reputational risk and whether this would increase regulatory scrutiny or delay its asset cap being lifted if it incurs any losses and/or probes that expose inadequate risk and controls," J.P. Morgan analysts wrote in their note.

More regulatory involvement is the last thing Wells Fargo needs. The company has been operating under a $1.95 trillion asset cap since 2018 after its phony-accounts scandal came to light.

The asset cap prevents the bank from materially growing its balance sheet and has significantly dampened profits in recent years.

In February, it looked like Wells Fargo had taken a step in the right direction. Media outlets reported the Federal Reserve had approved the bank's proposal for overhauling its risk-management and governance structure, a key step on the journey toward asset cap removal.

Share of Wells Fargo traded more than 2% higher as 1:30 p.m. EDT today.

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