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03 March 2024

Banks report $50bn loss

By Nitin Nambiar



Global banks and financials have announced more than $50 billion (Dh183.5bn) of write-downs and losses since September, according to Reuters data.

Among the four major banks announcing results this month, Morgan Stanley seems to have been the hardest hit. The bank reported the first quarterly loss in its 72-year history on Wednesday, heightening fears that the financial toll would keep mounting from the crisis in the sub-prime mortgage market.

The bank took a $9.4bn (Dh23.4bn) write-down on sub-prime-linked investments for the fourth quarter, bringing its cumulative losses for sub-prime mortgages to $10.8bn (Dh40bn). Bear Stearns swung to its first quarterly loss ever the following day and said it was taking a $1.9bn (Dh7bn) write-down due to bad bets made on risky home loans.

The company reported negative revenue of $379 million (Dh1.3bn) for the quarter, versus $2.4bn (Dh8.8bn) a year ago.

According to some estimates, Wall Street banks and investment firms so far have reported close to $56bn (Dh205.5bn) of losses as a result of the crisis in the mortgage market. Worst-case estimates put the eventual bill at $200bn (Dh734bn) or more.

Earlier in the quarter, other major banks also announced continuing losses from sub-prime write-downs. Swiss bank UBS announced sub-prime and mortgage-related losses of $13.8bn (Dh50.6bn) in its Q4 results. Citigroup seems to be the worst-hit taking a $17.4bn (Dh63.8bn) in cumulative write-downs. Merill Lynch reported a total of $7.9bn (Dh28.9bn) in write-downs on collateralised debt obligations (CDOs) and sub-prime mortgages. Merrill reported a net loss from operations for the third quarter of $2.3bn (Dh8.4bn) – the biggest loss in its 93-year history.

Bank of America reported cumulative losses of $5.1bn (Dh18.7bn) from sub-prime and mortgage related write-downs in the fourth quarter.