Markets braced for bad news from major US banks
Major American banks are expected to unveil substantial losses and secure more cash from abroad in what is shaping up to be a pivotal week for the global credit crisis, with central banks also poised to weigh in again.
Citigroup Inc could write off as much as $24 billion and lay off 20,000 workers in a drive to cut costs and boost capital, CNBC said on its website in a report dated Sunday.
CNBC said the plans will be unveiled today when Citi, the largest US bank in terms of assets, reports fourth quarter results.
Investment bank Merrill Lynch is just as troubled.
The Financial Times said yesterday that Merrill was seeking about $4 billion in a second capital raising, and the Kuwait Investment Authority was expected to be a significant investor.
A deal could be announced as soon as midweek, the paper said, citing people familiar with the matter.
The New York Times on Friday reported Merrill was expected to suffer $15 billion in losses stemming from bad mortgage investments, almost twice the company's original estimate, when it releases its results later this week.
The FT also reported on Saturday that Citigroup was putting the final touches to its second big fundraising, seeking up to $14 billion from investors.
The $200 billion Kuwait Investment Authority had no immediate comment on Monday on the reports it may buy into the two damaged American banks.
Banks, wrestling with huge losses stemming from mortgages lent to people ill-equipped to repay them, have been seeking cash from sovereign wealth funds.
In December, Merrill Lynch secured as much as $7.5 billion by selling a stake to Singapore's government and an asset manager. The month before, Citi agreed to sell up to a 4.9 percent stake to Abu Dhabi for the same amount.
As well as Merrill and Citi, other big names such as State Street and JPMorgan report results this week.
The Federal Reserve auctioned $30 billion yesterday and the European Central Bank and Swiss National Bank will continue their unprecedented US dollar lending to banks, as part of ongoing coordinated central bank efforts to help calm credit market tensions.
The Bank of England will also weigh in.
Results of the latest "term auctions", a plan agreed in December and one which has helped money market rates ease, will come today.
One- to three-month Euribor interbank interest rates declined on Monday amid central banks' continuing moves to inject extra liquidity into markets.
Agencies
(China Daily 01/15/2008 page17)
