Reuters reports that US bank stocks fell Tuesday after continuing concerns about how subprime lending-related losses would impact fourth-quarter earnings. Shares in Goldman, Lehman, Merrill and Morgan Stanley all fell after JPMorgan Chase cut its earnings estimate for each firm. Citi has also cut its fourth-quarter estimates for Goldman, Lehman and Merrill (pointing to challeges in fixed income), although the company has keep its forecast for Morgan Stanley unchanged.
Royal Bank of Scotland is to take a $3bn write down this year as a result of the credit crunch. The write down relates to its own investment banking unit assets and operations recently acquired as a part of the ABN AMRO deal.
Reuters reports that CIBC has confirmed that it is write down $222m in US mortgage-related assets for November. That's in addition to the $457m it wrote down a few weeks back. The firm also warned that it could face 'significant future losses' in US mortgage-related derivative contracts that are hedged with counterparties if the market and economic conditions further deteriorate.
The Wall Street Journal reports that Deutsche Bank CEO Josef Ackermann is predicting that the fall-out from the US subprime lending crisis isn't over. He expects more write-downs to come out of the woodwork.
The Financial Times quotes Legg Mason CEO Chip Mason, who said earlier this week that the credit markets are in the worst state they have been in in his 47 years working in the financial markets. Mason said that 'it is a very unusual situation. I have not seen anything like this, where nothing is traded'.
The Daily Telegraph reports that Merrill Lynch says that a combination of rising energy prices, unemployment, a slump in housing and the ongoing credit squeeze is likely to push the US into recession next year. Merrill economist David Rosenberg said that 'the US consumer is on the verge of the precipice of experiencing its first recessionary phase since 1991'.
The Times reports, that acording to the UK's Office for National Statistics, the volume of British companies acquired by foreign businesses dropped 73% in the third quarter (to $28.8bn) as the credit crunch began to bite.
The Financial Times reports that Rabobank has now bailed out SIV Tango Finance, a vehicle it manages with Citi, and is planning to take $7.6bn of assets onto its balance sheet to prevent a fire sale.
Bloomberg reports that Mizuho Financial Group is looking at injecting $910m into its securities unit to shore it up following US subprime-lending related losses. The news agency also reports that Moore Capital Management, a hedge fund run by two former Amaranth traders, is said to have lost 15% in November on stock and convertible-bond trades, and that Whistlejacket Capital, an SIV managed by Standard Chartered, has sold assets to reduce the fund to $10.8bn since August. The bank is also to take over $3bn of the SIV's assets onto its own balance sheet.
Orange County, California, which was famously bankrupted in 1994 after playing with derivatives, apparently has $837m in exposure to structured investment vehicles (SIVs). $460m of the total in in vehicles which are facing crdit downgrades.
And finally, just to make things worse, The Wall Street Journal reports that New York State prosecutors have sent subpoenas to several investment banks, including Bear Stearns, Deutsche Bank, Merrill Lynch, 'seeking information related to the packaging and selling of debt tied to high-risk mortgages'. Sounds ominous.
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