writedowns

UBS, which suffered the biggest writedowns of any European bank, received a government bail-out in October.

Indeed, the writedowns have been so vast that some analysts expect to see some writeups in the next set of results.

Merrill said in a statement yesterday that it had "no reason to believe" that it had done deals designed to avoid writedowns.

The bank was forced to make writedowns in its real estate investments and wind down its mortgage business .

To put this in context, the writedowns estimated by the IMF are equal to 37 years of official development assistance at its 2008 level.

"December writedowns are still not the end. We are rather at the beginning of the valuation correction than at the end. "

The company has recorded more than $31bn of credit-related writedowns since the crisis began.

Both banks said they expected their writedowns would be enough to cover all expected losses.

As the big writedowns begin, British banks are now starting to beef up the capital that underpins their operations.

Such writedowns could again imperil banks' capital ratios, potentially forcing them once more to go cap in hand to the Government.

There was much talk of further multibillion-dollar writedowns as a result of the subprime crisis.

As its chairman admitted ruefully: "No one expected this [more than $20bn in writedowns and a capital raising] from UBS. "

The writedowns continued to escalate.

Banks have written down at least $150 billion in assets over the past six months, and may have a similar amount of writedowns to come.

In addition to the writedowns, banks around the world have had to absorb $600bn of actual losses on soured loans.

The bank has reported $20. 3 billion in net losses, and taken more than $64 billion in credit losses and writedowns since Pandit took over.

Writedowns among the top six issuers have slowed since June, as have late payments.

Citi has suffered more than $50bn in writedowns and credit provisions since the outset of the crisis.

It was their banks' ballooning exposure to such debt securities, and the associated writedowns, that effectively cost both men their jobs.

It will also set a precedent for dealing with potential writedowns on Portuguese, or other sovereign debt.

Last month it offloaded securities with a nominal value of $30bn to Lone Star, the US investment group, triggering further writedowns.

JPMorgan once again avoided the huge writedowns on subprime mortgage-related securities that have plagued its rivals.

After all, the IMF's estimates of the potential writedowns on US assets alone have grown nearly three-fold in just one year.

With the ABX derivatives index continuing to decline, some analysts fear that further writedowns could be needed.

But low single digit earnings multiples are not solely reserved for banks that have announced the biggest writedowns.

It starts from total reported writedowns up to the end of 2008, which come to $510bn in the US, $154bn in the eurozone and $110bn in the UK.

Writedowns could easily threaten the solvency of many financial institutions.

The move comes as battered financial services firms are set to roll out their second-quarter earnings, with further asset writedowns likely.

The alternative is forced writedowns of bad assets in the financial sector and either more fiscal recapitalisation or debt-for-equity swaps.

Western financial institutions, smarting from huge debt writedowns at Kazakh banks, are unlikely to resume lending soon.

But the bigger issue for investors is whether banks' new earnings potential can counteract the inevitability of further writedowns.

Hybrid securities count toward capital reserves, helping banks shore up their finances after writedowns.

Although writedowns on loans will decline, they will continue, simply reflecting the overall performance of the economy.

Many analysts expect UBS to post more writedowns in the first quarter on securities linked to US residential mortgages.

The huge writedowns on trading-book assets that defined the first phase of the crisis were horribly unpredictable.

Yet the vast majority of collateral in the Chinese banking system is land or property, so a slump could force writedowns across the board.

Canadian banks have not escaped the turmoil and all have taken significant writedowns on their exposure to toxic securities.

The writedowns will add to pressure from investors and auditors for other lenders to follow suit.

The world's biggest banks have been hit by billions of dollars in asset writedowns in credit and subprime losses.

Fresh writedowns will reduce the ability of banks to lend, which will crimp investment and slow economic growth.

This reduces their ability to absorb losses and writedowns by prompt corrective cost reductions.

Last December, it reported the first quarterly loss in its 85-year history following writedowns that were twice as big as expected.

But if investors fear steep writedowns, the little carrot won't help.

Tim Jones, partner at Coller Capital, a secondaries house, also forecast two rounds of writedowns.

That would mean writedowns of Italian and Spanish bonds and gains on German and British ones.

It also means the mass bankruptcy of insolvent households and forced writedowns of mortgages.

Some writedowns will turn up beyond the big wholesale banks, of course.

Mr Price yesterday said BofA was facing a further $3bn of writedowns on its subprime-related holdings.

In the following months, Bear Stearns reported billions of dollars in writedowns, as did many of its Wall Street peers.

The problem may be acute for small regional banks that have not yet taken substantial writedowns on their loan books.

Buffeted by plunging stocks and debt prices, Goldman could realize more than $9 billion in writedowns in the quarter, Staite estimates.

The net figure included a SFr508m mark-up on collateralised debt obligations and SFr86m of writedowns on the leveraged finance portfolio.

Carlyle, which invested $25m in 2006, has had to take significant writedowns, a spokesman says.

The industry has taken all its writedowns of bad investments. From 2005 to 2008, almost half the private equity ever deployed was invested.

Legacy issues from the credit bubble and credit problems from the downturn will lead to big writedowns on loans and other assets.

CIBC, Canada's fifth-largest bank, is facing subprime- related writedowns in excess of C$2bn (US$1. 97bn) next year, analysts said.

The writedowns included $3. 1bn related to contracts Merrill entered into with bond insurance groups to hedge against losses.

For Bank of America, he estimates leveraged loan losses will be $700m and the mortgage writedowns $300m.

The IMF said total losses and writedowns would reach about $945bn, based on market prices in mid-March.

Even if the worst doesn't come to pass, Europe's banks will have a lot of pain to absorb through writedowns of billions in bonds and loans.

UBS, once the stalwart of Swiss banking, last year became one of the bloodiest victims of the credit crunch after $18bn of writedowns.

Writedowns of toxic assets were a fraction of last year's in part because of a change in fair-value accounting rules.

But private estimates go eight times higher than that when taking into account future losses from real estate writedowns.

When loans originated in Japan and Europe were included, the writedowns would hit $4, 100bn, it said.

Including loans originated in Japan and Europe, the writedowns would hit $4, 100bn.

Credit Suisse Writedowns to Cut Profit by $1 Billion