It may all be doom and gloom in the U.S., but the heads of two of Europe's largest banks believe that the economy is over the worst of it.
The head of France's biggest listed bank, BNP Paribas, told Italy's La Repplica newspaper, "The worst should be over and I think that from the second half onwards the crisis should normalize: that is, the phase of exceptional turbulence on the markets should end."
Over the the UK, the news was nearly as good. The head of Barclays (NYSE: BCS), the biggest bank in the UK said that the 4.5 billion pounds the bank had raised was adequate to get it though the crisis, according to The Telegraph.
Both men may be bank CEOs, but they may be wrong. A growing number of analysts see bank and brokerage earnings getting worse in the second quarter and even into the second half of the year. The primary reasons behind growing financial company balance sheet problems, especially the mortgage crisis and LBO loans, may be becoming more troubled and not less.
If the economy tips into a deep recession, banks will find themselves further damaged by loans from every sector going into default. That means more write-offs, which means more raising of capital and further shareholder dilution.
CEOs at big banks were singing the same tune in May. It turned out not to be true.
Douglas A. McIntyre is an editor at 247walls.com.
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Reader Comments (Page 1 of 1)
6-29-2008 @ 11:52AM
mark said...
Europe is very similar to the U.S. with its financial issue. The bottom line is until gas and food prices come down tremendously, the "recession" continues. The typical hedge fund manager, politicians, etc. are way out of touch with the middle class mindset. We have almost given up on you.
The people at the top expect all the other people to just spend, spend, spend. Well, you know what, we are out of money. How silly you look giving up a stimulous package that is giving us taxpayers such a small amount. And then, the talking heads debating on how we are going to spend it. Again, just assuming we have no discipline and will continue to spend to save this economy. This time you have gone too far. We are in a prolonged downturn until at least the 2nd quarter of 2010.
Thanks alot!!
6-29-2008 @ 1:07PM
william lindblad said...
I agree with Mark. The people doing all of the optimistic speaking are either out of touch or are knowingly keeping a falsehood alive. In truth, you really can't expect those at the top of the financial world to start to preach doom and gloom no more than you would a similar statement from the real estate groups. You can read what you want into statistics. The employment report issued by the dept of labor is held by many to be anywhere from 20 to 50% lower than reality. There is a lot of information that they don't count. The various realty reports of late show a small increase in home sales. Interesting? They have a habit of counting sales, not closings.
If everything is going so well across the pond why do they have bank problems and inflation also? Barclay's is fortunate as they managed to fund on their own. The U.K. government has been on a spending spree and the BOE still has it's hands full with Northern Trust. There is little left to bail out anyone else.
This is not getting better anytime soon - here or there.