Posted on 04/13/2008 8:59:34 AM PDT by TigerLikesRooster
April 13, 2008
US banks Citigroup and Merrill Lynch reveal fresh $15bn loss
Iain Dey
CITIGROUP and Merrill Lynch will heap further pain on Wall Street this week as they reveal additional sub-prime write-downs totalling $15 billion (£7.6 billion) or more.
In another sign of the intense pressure on leading banks, Deutsche Bank is attempting to offload some of its €35 billion (£28 billion) of toxic debt to a consortium of private-equity firms.
Huge exposure to American mortgages is expected to result in Citi taking a $10 billion hit to its accounts, dragging the bank to a first-quarter loss of almost $3 billion. Some analysts believe Citi’s write-downs could stretch to as much as $12 billion.
Merrill will suffer $5 billion of write-downs, analysts say, which would push the bank $2.7 billion into the red.
It is expected to knock a further 20% from the value of its sub-prime holdings, in spite of the fact that it announced $18 billion of write-downs only three months ago.
The new rash of Wall Street losses and write-downs come in addition to the billions that have already been recorded.
The world’s biggest banks have suffered losses and write-downs totalling almost $250 billion since the beginning of 2007, according to analysts. Last week the IMF shocked markets by saying that global losses from the credit crisis could rise to $945 billion.
JP Morgan is expected to offer the only glimmer of hope from this week’s results, posting a small profit, in spite of huge exposures to leveraged loans.
Some of the world’s biggest banks are beginning to work on new solutions to relieve tension in the financial markets.
Deutsche Bank is understood to be talking to a number of private-equity funds about a disposal of some of its backlog of loans to venture-capital firms.
The value of leveraged loans sitting on Deutsche’s balance sheet is greater than its shareholder equity. The bank is planning to sell on the loans to the private-equity funds at a loss to free up its balance sheet, according to market sources.
The plan mirrors a similar move by Citi to sell $12 billion of its leveraged-loan portfolio to private-equity firms including Blackstone, Apollo and Texas Pacific Group.
The Citi deal is hoping to close the deal in time for this week’s results. It is one of a number of significant moves by Vikram Pandit, Citi’s new chief executive.
But the sale could be hampered by problems with the planned inclusion of loans related to EMI, the music business. Citi bankrolled its buyout last year by Terra Firma Capital Partners, and still holds about $5 billion of EMI debt.
It was reported yesterday that Citi had been forced to remove some of these loans from the sale after buyers complained they did not have sufficient financial information on EMI.
Citi announced plans to sell its Diners Club credit-cards business to Discover last week, and is also considering a sale of its German retail-banking operations.
City insiders believe job losses are inevitable. Pandit is thought to be considering a radical reshaping of the bank’s equity research organisation. Insiders say that it may be slimmed down to focus on its top 300 clients, rather than providing a wider service to investors.
Some banks are looking to use the crisis to steal a march on their competitors. HSBC last week revealed its intention to use the tightening credit conditions as an opportunity to boost its 3% share of the UK mortgage market.
Abbey, which is owned by Spain’s Santander, has written close to 20% of all the mortgages handed out in Britain in the first quarter, according to sources close to the company. The bank is funding its expansion in the market by attracting more money from savers, analysts say.
Ping!
For they have sown the wind..........
bttt
Will settle for 10 cents on the dollar.
Mail check to: ST, P.O. Box ....
Poor babies...
A billion here, a billion there, pretty soon you’re talking about real money.
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."~~Ludwig von Mises
Next quarter they will find another $ 5 billion. Then in the next quarter they will recompute and restate losses again under some esoteric accounting rules. Then in 2009 they will wake up to reality (after the economic numbers come in). Somebody will be urging the bank to write everything off and get it over with. So then they will declare about 50% of it all at once.
Hoping against hope they can hide the other 50% of toxic trouble for another three years.
I remember CEO of Chrysler Lee Iacocca taking one dollar a year salary until Chrysler's problems were fixed.
Glad to see Wall Street CEOs doing the same.
Wot?
"They're not."
They're Not?
"They're not."
Oh. Never mind.
Toddster, that is why folks are gathering pitchforks, boiling tar, collecting their feathers and getting all likkered up. You continue to protest the innocence of your friends. That will do nothing to save their sorry souls. They are guilty. Of what. Well of the seven deadly sins we can heap lust, gluttony, greed and pride on their heads. They attempt to justify this by acccusing their accusers of sloth and envy, but sloth would be impossible. Those guys sitting in Park Ave. condos did not get their wealth through physical labor. The hard work was all done by hard working Americans. They just managed to get the rewards.
Envy????? That is what you call it when you want justice against those who undermined what used to be a sound economy through malinvestment based on a bunch of get rich quick schemes.
Wrath. No. We will leave their sorry souls to god.
Folks keep wondering if we are at a bottom. The bottom is only in after the bulls capitulate and there is no sign that the bulls have yet capitulated, but it must be like Chinese water torture for them.
I think that socializing the risks and privatizing the rewards is a bad idea.
You continue to protest the innocence of your friends.
Which friends did I say were innocent?
They are guilty. Of what. Well of the seven deadly sins we can heap lust, gluttony, greed and pride on their heads.
Well, there you go.
Wrath. No. We will leave their sorry souls to god.
Good idea. Does that mean you'll stop whining?
LOL!
Hey, I got a great idea. Why don’t we put up billions to originate loans requiring no documentation or collateral. Well give them to illegal immigrants too.
But don’t worry. We will make sure we spread the risk around so everything will be ok, but lets make sure we keep a lot these loans in house as an investment.
Is there incentive to care about the risk? Why should I care about such things. I still keep all my bonus and severance money if I get pushed out.
You want to elect Hillary or Obama? Just get the American voter outraged at Wall Street thievery and over compensation for jackass executives who lose money but have the corporate board in the back pocket.
That’s how you elect a Democrat this November who will jack up capital gains and a host of other taxes. PLUS even more insidious Obama has come out demanding that income above $97500 have Social Security taxes levied on it. Right now it is capped at $95,000
That's right. Only jackasses get themselves appointed executives at Citi and Merrill.
Right now it is capped at $95,000
Where were you when it was capped at 80K?
Whatever it is ..... You wise guys will rue the day your moronic greed got Obama elected. Though I think McCain will get elected
They are actually discovering money gone in excess of the 100 billion $ in bonuses they siphoned off over the last three years. Time to start checking their lunch pails.
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