- A single company has been blowing a hole through Wall Street bank earnings.
- The “single client” has reappeared in the fourth-quarter announcements of major banks as the culprit for hundreds of millions in unexpected, one-time losses.
- While other banks were publicly mum, JPMorgan and Goldman Sachs identified the culprit: Steinhoff International, a South Africa-based retailer whose stock cratered after an accounting scandal.
- “It is by far and away the largest loss in [the equity] business we’ve seen since the crisis,” JPMorgan CFO Marianne Lake said.
A single company has been blowing a hole through Wall Street bank earnings, reappearing in the fourth-quarter announcements of major banks as the culprit for hundreds of millions in unexpected, one-time losses.
It started with JPMorgan last week, which reported a $273 million hit to its fourth-quarter earnings from “a single client,” followed by Citigroup on Tuesday announcing a “single client” was responsible for a $130 million wipeout in in its equities-trading revenue and most of $267 million in credit losses in its Institutional Clients Group.
On Wednesday, Bank of America announced a $292 million charge-off from a single client, and in an analyst call later in the day, Goldman Sachs announced a $130 million loss on a loan to one company.
While Citi and Bank of America didn’t name names, JPMorgan and Goldman identified the same company as responsible for knocking off hundreds of millions from their financial results: Steinhoff International, a South Africa-based retailer whose stock has cratered following an accounting scandal.
“I wanted to come right out and mention that we took a $130 million loss on a single structured loan, and that was Steinhoff,” Marty Chavez, Goldman Sachs’ CFO, said Wednesday on an earnings call.
Steinhoff, which owns the US furniture chain Mattress Firm, is believed to be the “single client” responsible for the losses at Citi and Bank of America as well.
A group of Wall Street banks loaned money last year to an entity controlled by Christo Wiese, the former chairman of Steinhoff, a deal that has since gone belly-up.
“It’s very clear who participated in that loan and at what levels,” Chavez said, adding that others had disclosed the loss differently.
Citi, HSBC, Goldman Sachs, and Nomura initially arranged the $1.8 billion margin loan, backed by some 628 million shares of Steinhoff’s now-crippled stock, and subsequently sold off parts of the loan to other banks.
“It is by far and away the largest loss in that business we’ve seen since the crisis,” JPMorgan CFO Marianne Lake said in an analyst call.
Lenders had 18 billion euros, or $22 billion, of exposure to Steinhoff loans at the end of March, according to Bloomberg.
This post has been updated with new information.