- One 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 mum, JPMorgan identified the culprit: Steinhoff International, a South Africa 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," CFO Marianne Lake said.
One 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.
Wednesday, Bank of America announced a $292 million charge-off from a single client, but, following Citi's example, declined to say who was responsible.
"We would not want to comment on specific information on any borrowers," CFO Paul Donofrio told journalists. CEO Brian Moynihan added: "Once in a while something doesn't turn out the way you want, because that's the definition of what risk is."
Only JPMorgan was willing to confirm the name of the company responsible for knocking nearly $700 million off of the three banks' otherwise strong financial results: Steinhoff International, a South African retailer whose stock has cratered following an accounting scandal.
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.
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," CFO Marianne Lake said in an analyst call.
Other banks are expected to have exposure to Steinhoff as well. Bloomberg reported that Goldman Sachs was expected to take a loss on Steinhoff as well, though the bankdidn't explicitly detail one in its fourth-quarter earnings release.