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Monday 24th of May 2010
October 16, 2008    

US banks see losses mount up

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by Kay Murchie

US banking giants Citigroup, JP Morgan, Merrill Lynch and Wells Fargo have this week all announced disappointing financial results.

Citigroup has reported a net loss of $2.8 billion, making it the bank’s fourth consecutive loss after it was forced to absorb $4.4 billion in write-downs.

JP Morgan has reported a massive 84% decline in third quarter profits and Jamie Dimon, the bank’s chief executive, warned of falling income ‘over the next few quarters‘ due to the economy and housing sector downturn.

Meanwhile, Merrill Lynch, which was quickly sold to Bank of America following the collapse of Lehman Brothers, reported a loss of $5.15 billion in the third quarter. The loss marks the bank’s fifth consecutive quarterly loss.

Finally, Wells Fargo which has just agreed to purchase struggling Wachovia, reported a 25% fall in earnings to $1.64 billion.

However, Wells Fargo said it was experiencing a ‘tremendous inflow‘ of deposits as worried savers seek a safer haven.

In related news, the US announced a $250 billion (£143 billion) scheme which will see the Government purchase stakes in the country’s largest banks in an attempt to restore confidence in the banking industry.

The deal is similar to that unveiled by the UK and European nations in a bid to prevent financial meltdown.

Stock markets responded well to the banking bailout packages announced earlier this week, but have plunged over the last couple of days due to fears of a global recession.

According to Yutaka Miura, senior strategist at Shinko Securities, yesterday’s news of a 1.2% fall in the value of US retail sales between August and September, has unnerved investors and confirms a sharp slowdown in the US economy.

Furthermore, investors today are coming to terms with the news that US industrial production fell 2.8% in September - the biggest fall since 1974.

Japan’s Nikkei index fell 11% today, while Hong Kong’s Hang Seng fell 7.6% to 14,785.60 points.

European shares have been trading lower following the falls in Asia. In London this afternoon, the FTSE 100 was down 5.7%, France’s Cac 40 was 6.7% down, while Germany’s Dax was down 5.9%.

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