US banks to reveal additional sub-prime write-downs
US investment banks, Citigroup and Merrill Lynch, are to announce further sub-prime write-downs totalling $15 billion (£7.6 billion).
Citigroup is expected to take a $10 billion hit to its accounts which will take the bank to a first-quarter loss of nearly $3 billion. Many analysts believe Citigroup’s write-downs could reach as high as $12 billion.
Merrill is expected to announce a further $5 billion of write-downs which would push the bank $2.7 billion into the red, according to analysts. It is believed that Merrill will knock an additional 20% from the value of its sub-prime holdings, despite the fact that it revealed $18 billion of write-downs just 3 months ago.
In a further indication of pressure on leading banks, Deutsche Bank is understood to be talking to a number of private-equity funds about offloading some of its backlog of loans to venture-capital firms.
The deal is similar to that by Citigroup, who intends to sell $12 billion of its leveraged-loan portfolio to private-equity firms including Apollo, Blackstone and Texas Pacific Group.
Citigroup hopes to close the deal by the time it announces its results later this week. It is one of a number of significant moves by Citigroup’s new chief executive, Vikram Pandit.
The new losses expected by Citigroup and Merrill come in addition to the billions that have already been announced.
According to analysts, the world’s leading banks have suffered losses and write-downs totalling nearly $250 billion since the start of last year.
The International Monetary Fund (IMF) has warned that losses from the worldwide credit crunch could reach $1 trillion (£503 billion).