U.S. Banks Citigroup and Merrill Lynch Reveal Fresh $15 Billion Loss, Deutsche Bank Holding More Toxic Waste on Balance Sheet than Shares Are Worth

April 13th, 2008

HAHA Another weekend of financial news so horrific that it can’t be revealed during market hours. Remember, I’m taking a break from using the EMERGENCY designation when it comes to this type of news. This is the new normal. I guess we should get used to it.

Via: Times Online:

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.

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2 Responses to “U.S. Banks Citigroup and Merrill Lynch Reveal Fresh $15 Billion Loss, Deutsche Bank Holding More Toxic Waste on Balance Sheet than Shares Are Worth”

  1. Eileen Says:

    Yes it is Funny isn’t it (in a weird sort of way) that the Bad News Bears always find it time to purge themselves when the already asleep at the wheel news sources are holed up in their bunkers.
    I don’t know why, I don’t look at these things latest losses as emergencies anymore either. Everytime I read one of these articles about another huge loss, why I feel some sort of liberation.
    Less crazy by the minute. The financial stuff that Stopped Making Sense (one of my Favorite Talking Heads albums) a long time ago is finally being born and brought out into the light of day. Seriously, I feel bad for people losing money, and losing their jobs. I do. Really I do.
    Anymore the only things that make sense to me anymore are thoughts of home. I’m looking into buying land adjacent to my mom’s property. I am also asking an astrologer to look into the signs. Seriously. I am arranging that now as I type. I don’t care if that sounds out there. I AM! Better than paying a financial advisor or stock broker that would recommend I buy stock in X,Y or Z.
    Tonight one of my mother’s caregivers’ husband attempted to commit suicide. Four kids, on Social Security disability and welfare in the form of food stamps. The whole spectrum. Buy no fault of his own this person was disabled in a car accident and the courts have dragged the settlement on for many, many years. This man find its difficult for his wife to earn cash, while he is at home disabled.
    In any case, if need be, I will take a leave of abscence. I need TIME. And feeling less like a nutcase every day, I am going to have to do a lot to get out of here to get home. I am hoping to keep my mouth shut about this in my day job.
    But that’s the plan.

  2. John Doh Says:

    Pardon my Idiocracy,…but since when was M.L.
    a BANK?
    It’s a Casino!
    Step right up.

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