Sunday, September 16, 2007

World Banks to announce $30B hit

The Sunday Times in the UK says that the world investment banks are set to announce that their previous quarters' numbers will show a hit of $30B from their exposure in commercial paper, SIV's and subprime. Essentially it means that some investment banks have made no money over the last quarter and that the bank numbers will be as important as the decision of the Fed on interest rates. Also, there is a feeling that the Bank of England should also reduce rates even though they have decided against such a move this past week.

The world’s investment banks are to reveal a $30 billion (£14.9 billion) hit from bad debts as they unveil results that give the first real insight into the impact of the debt crisis.

City analysts predict the banks will have to write down as much as 10% of the $300 billion of leveraged loans currently agreed but not yet syndicated when they report third-quarter results to the market.

Banks are also expected to announce further hefty provisions to cover their exposure to commercial paper, including the so-called conduits and SIVs, a type of highly leveraged investment fund. In some cases profits for the third quarter could have been almost wiped out by a combination of exposure to bad debts and complicated commercial paper.

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