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Standard & Poor: Banks should prepare for second wave of credit crunch losses

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by Kay Mitchell

Credit rating agency, Standard & Poor, has warned that a recovery in the banking industry is at least a year away.

According to the agency, US and European banks are entering a second phase of credit crunch related losses.

The warning comes as investment bank, Lehman Brothers, had its forecast slashed by analysts after predicting it could announce losses amid speculation that it has failed to raise new funds in Asia.

The bank is due to report third-quarter figures on 16 September with analysts forecasting it could write-down up to $4 billion (£2.15 billion) in investment, bringing the total to $12 billion.

Reports have speculated that Lehman has held secret talks with Chinese and South Korean investors in a bid to raise $5 billion, however, a spokesperson for China’s Citic Securities said no such talks took place.

Earlier this month, Deutsche Bank wrote off a further €2.3 billion (£1.8 billion) to take its total credit crunch bill to over £5 billion – making it one of Europe’s largest victims of the credit crunch.

However, Switzerland’s largest investment bank, UBS, has recorded approximately £19 billion of write-downs making it the biggest credit crunch victim in Europe.

Meanwhile, Wall Street bank Merrill Lynch, is attempting to improve its balance sheet after it has been hit by £26 billion of write-downs.

In related news, Industrial & Commercial Bank of China (ICBC) has become the world’s most profitable bank after it reported a 57% rise in half-year profits.

The bank, which is the largest in China, made 64.5 billion yuan (£5.01 billion, US$9.4 billion) in the six months to the end of June and easily outperformed its rivals worldwide, who are currently announcing write-downs as a result of the credit crunch.

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News posted: August 21, 2008

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