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.
As someone who knew rural Democrat (Bible and gun hugging xenophobes, ya know) backers of Joe McCarthy, working-class Goldwater conservatives, and working-class Reagan Democrats -- I must question that assumption.
Even in the days when Americans -- not like the Rats of today who have moved beyond being Americans -- ran the Democratic Party we working-class conservatives -- and nary a Republican Party member among us -- voted conservative especially on issues of communism.
Today it's radical Islam and the need to defend against it "over there." There are a host of domestic issues that move sane voters to vote conservative.
I do not believe that the average voter says, "If Wall Street does something disagreeable I am going to blame conservatives."
There is nothing "conservative" about a loose monetary policy.
You’ve got to admit, this time when someone says no one will ever again buy a NYC security, it’s going to sound really convincing.
When they bought up the Sears card, I canceled it.
I'll start giving away the biggest slice of leftover cake and take the smaller one for myself. Will that help?
You should read some Ayn Rand.
Huh? Only tight policy? It's only conservative policy that popped the dot com bubble? Caused the Orange County bankruptcy? Caused the sub prime crash? The 1987 crash? All of those were caused by tight monetary policy.
Or maybe he's never out-earned the cap.
That's funny. Never had you pegged as a Randian. Followers of Rand usually believe in the gold standard. Greenspan did, until he didn't.
Sure got your goat. The cause of the Orange County bankruptcy was foolish speculation with the public's money.
Or maybe he's never out-earned the cap.
So if you are making above that $102,000 SS cap then Obama is going to ream out your wise ass and the person you can blame is the one you see in the mirror At least he'll try to. I've seen his published remarks saying so. Think it was with Maria Bartiromo. Actually I don't think Obama can get it through Congress but he would raise the cap dramatically. Maybe double it
Rich nor rich? All I know is you are an utter moron when it comes to trade deficits. The lamest kind of free trade libertarianism that verges on traitorousness. But then you only imitate the Bush administration that cares not a whit about trade deficits with China and Muslim oil producers
Now you're buttonholing Rand. Good grief.
But the bomb dropped when the Fed went to "conservative" monetary policy according to you.
Let' see. I'm planning on voting for McCain. So how would the increased cap on SS be my fault? Oh, I get it now. I make too much money to suit DennisW.
Well said. Veritas Honor.
First you are putting words in my mouth. Second, I have no idea what you think you are taling about.
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