British banks to reveal impact of credit squeeze

The credit squeeze has had an impact on banks in the US with many writing off tens of billions of dollars after the collapse in credit-related securities.

Charles Prince, the chairman and chief executive of Citigroup, resigned recently as the bank said it may write off $11 billion of sub-prime mortgage losses, in addition to a $6.5 billion write-down last quarter.

Furthermore, Merrill Lynch, recently announced losses of nearly $8 billion in its mortgage-backed securities business and Chief Executive, Stan O’Neal, stepped down.

Morgan Stanley is also to take a $3.7 billion write-down in its fourth quarter but warned that this could increase to $6 billion if all its sub-prime assets turn bad.

Analysts are now concerned that ultimately, losses could run into hundreds of billions of dollars and it is feared that major banks in the UK will follow its US equivalents with massive write-offs.

The UK’s major banks are coming to their financial year-ends and share prices have fallen. The banks are set to inform the market how badly they have performed when they begin issuing pre-close trading reports at the end of November.

Analysts say the problems in the financial markets are not yet over and banks and investors in banks have no way of knowing just how much some of their most risky assets types will decline in value.

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