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A fresh round of write-downs at Merrill pushed that firm into a $15.3 billion loss for the fourth quarter.
Analyst downgrades took a toll on shares of investment banks as some investors began to buckle down for another round of write-downs and losses.
The prospect of a larger round of write-downs has also increased speculation that the firm might reach a point in the coming months where it might be forced to seek a capital infusion from a larger financial partner.
In the first round of write-downs, Citigroup, Merrill Lynch and Morgan Stanley raised tens of billions of dollars from cash-rich foreign governments, including Abu Dhabi, China, Kuwait and South Korea.
Analysts expect the companies to announce a new round of write-downs and possibly be forced to raise capital by issuing additional shares, which would dilute their value for current shareholders.
Of course, the problem is that this downturn started with the banks, so this round of write-downs comes at a time when the sector is already weak and needs government guarantees in order to raise new capital.So with the hare already racing away, is there any hope for the tortoise at all?
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He also argues that banks and other financial institutions should be required by the government to mark all their assets to their current value, a hotly debated practice that others in the industry are resisting because it might set off a new round of loss write-downs.
Citigroup shares were up 44 cents, or 2.4%, to $18.99, even after Merrill Lynch cut its price target on the bank and predicted another round of significant write-downs.
I split the deck and she asked a round of questions, writing down the names of people I would meet, predictions for the next three to six months and the meanings of the cards on the table.
Though it is participating in the second round of a French government bailout, with new write-downs expected, investors had been counting on the capital top-up from the Fortis acquisition.
Though it is participating in the second round of a French government bailout, with further write-downs still expected and banks expected to put more and more money aside to cover bad loans, investors had been counting on the top-up from the Fortis acquisition.
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