Banks in Europe and the United States will survive the second wave of massive losses from the credit crisis in the next few months, some of them can reach the position to fight for survival with limited access to additional funding, a report shows the credit agency Standard and Poor’s, cited from the Guardian.
After six months in search of ways of securing the necessary financing banks will be forced to announce losses of billions of British pounds from the disposal of assets after the economic outlook for Western economies deteriorate further. In particular, the Agency expects deepening decline in U.S. housing market, which provoked the credit crisis last summer.
The price of housing in some states has fallen by up to 50 percent, the effect has spread to markets worldwide. Housing in Britain have become cheaper by between 10 and 12 percent by next year and expect more falls.
The report says that the estimated 250 billion dollar losses from the credit crisis, estimated at the beginning of the year, now has been increased to 378 billion dollars, and may be increased and to 500 billion dollars by the continuing decline in house price U.S..
Recent drop in Lehman Brothers has further aggravated the situation since the bank was one of the major players who bought mortgage problem, which in some cases have lost over 80 percent of its value. Furthermore Lehman had a property worth 33 billion dollars a forced sale may affect even more the real estate market.
Although state funds from countries such as Kuwait and China have managed to play a major role for banks like Barclays and Citigroup with a large capital injection, the report says they are not willing to invest more, while disruption of Western stock markets is not over. Korean state fund withdrew at the last moment of a deal to save Lehman, which led to its end.
Without access to additional capital to offset losses from the real estate market in the U.S. and growing losses from the fall in house price in Britain, banks may prove very difficult situation of financial difficulties.
“The financial industry attracted a huge amount of capital last year to offset losses, the report says. “Current market conditions, however, are less favorable and financial institutions waiting for them next wave of left with even fewer opportunities to raise fresh capital.”
“The second half of 2008 may prove the most difficult test for the former global financial sector”, commented the company.
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