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Bank of America's $292m charge tied to Steinhoff turmoil

Jan 17 2018 16:46
Laura J Keller, Bloomberg

New York - Bank of America just joined a roster of big US lenders suffering multimillion-dollar burns on their dealings linked to Steinhoff International [JSE:SNH].

Fourth-quarter earnings were crimped by a $292m charge, the Charlotte, North Carolina-based company said on Wednesday in a statement announcing results. The costs were incurred in two divisions: global markets and global banking.

The company got stung providing a margin loan that used Steinhoff’s stock as collateral, according to a person briefed on the matter who asked not to be identified discussing client business. Shares of the embattled retailer lost about 90% of their value last month after it announced December 5 that it had uncovered accounting irregularities.

Banks and other creditors had almost $22bn of  exposure to Steinhoff at the end of March. The company, criticised for being opaque about its finances, owns retail chains around the globe - including Conforama in France, Poundland in the UK and Mattress Firm in the US, which encompasses stores formerly known as Sleepy’s.

JPMorgan Chase chief financial officer Marianne Lake acknowledged last week that Steinhoff was the cause of a $143m mark-to-market loss in the bank’s stock-trading unit during the fourth quarter as well as $130m of credit costs.

On Tuesday, Citigroup CFO John Gerspach refused to identify which client was behind a “single client event” that triggered a derivatives loss of $130m in its equities-trading unit. He told journalists the same client issue was responsible for roughly 90% of its institutional clients group credit loss of $267m. That client was also Steinhoff, according to a person briefed on the results.

Goldman Sachs will likely disclose a quarterly loss connected to Steinhoff when the bank reports results later on Wednesday, people briefed on the firm’s financial results said last week.

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