"Credit Suisse said its pre-tax loss of 900 million Swiss francs in the first three months of the year includes 4.4 billion Swiss francs ($4.7 billion, 3.9 billion euros) related to "the failure by a US-based hedge fund to meet its margin commitments as we announced on March 29".
Trading on margin is the practice of using borrowed funds to invest in financial assets such as stocks. It can be very profitable for borrowers as they are often only required to put down a small percentage in cash while the stocks serve as collateral for the lender.
But large shifts in share prices can force borrowers to put up more money to meet their margin commitments, or sell the shares and potentially lose more than their investment and default on their loan.
Andreas Venditti, an analyst with the Zurich financial services company Vontobel, said the 4.4 billion Swiss franc hit was "at the higher end of the range" but had been limited thanks to "very strong operating results"."
