You haven't seen anything yet. Deutsche Bank analysts believe that losses from the falling value of subprime mortgage assets could soar as high as $300 billion to $400 billion worldwide, according to Bloomberg today. Mike Mayo, a New York based analyst, believes Wall Street's largest banks will be forced to write down as much as $130 billion because of subprime related debt. About $1.2 trillion of the $10 trillion of outstanding U.S. home loans are subprime, according to Mayo.
Deutsche Bank expects 30% to 40% of subprime debt to default, Bloomberg reports. Mayo thinks that losses on subprime loans to people with poor credit histories may be as much as half the total lent. He thinks banks and brokers will have to write off $60 billion to $75 billion this year. His estimate is based on known charges of $43 billion and an expected $25 billion not yet announced. Deutsche Bank writedowns are expected to be about $3.15 billion this quarter. He expects writedowns from HSBC Holdings Plc (NYSE: HBC), UBS AG (NYSE: UBS) Bank of Scotland, and Barclays (NYSE: BCS) to be around $5 billion each.
Deutsche Bank plans to hold a conference call on Nov. 15, so we'll have to wait until that time for more details.
Lita Epstein has written more than 20 books including the "Complete Idiot's Guide to the Federal Reserve" and "The 250 Questions You Should Ask to Avoid Foreclosure.
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Reader Comments (Page 1 of 1)
11-12-2007 @ 12:48PM
L said...
High risk loans are called high risk for a reason. And our government shouldn’t life one finger to bail out the banks! Perhaps banks will now
be more careful about weighing to whom they’re lending! It needs to be survival of the most financially responsible banks where
the banks are concerned!
11-13-2007 @ 10:10AM
Christiane said...
While the previous poster "L" would prefer not to have us "bail out" the banks so that they can learn their lesson...it is actually all of us who will suffer tremendously if we do not help the banks out of the situation. The isolationist way of thinking is provincial at best! We are all to blame in some way or another and we need to work together to remedy the situation. Americans are some of the most creative and innovative people on this planet, instead of laying blame, let's use what we have to solve the problem.
11-14-2007 @ 8:26AM
sid said...
Deutsche Bank holds a lot of the old Ameriquest loans and was "suprised" at the numer of bad loans. The South Florida area was bombarded with bad loans that have adjusted. Moody's recently contracted with Appraisals 24/7 (www.appraisals24-7.com) and found that most of these loans were based on inflated appraisals. Appraisals 24/7 discovered that 68% of the loans were made on inflated values.