Credit Crisis Still `Far From Over,’ Merrill’s Bernstein Says

August 13, 2008 by · Leave a Comment
Filed under: Industry News 

The assessment is correct, with the alt-a mortgages and credit default swaps right around the corner to be the next “boot to drop”, bank failures and mergers are likely. Estimates I have read and heard are for atleast $1 trillion dollars or write-downs or more.

The credit crisis is “broad, deep, and global” and “far from over” for financial companies even after they reported $500 billion in writedowns and credit losses, Merrill Lynch & Co.’s chief investment strategist said.

“Investors are significantly underestimating both the scope and the extent of the credit bubble and the consequences of its subsequent deflation,” Richard Bernstein wrote in a note to clients. “The problems are not confined to large institutions that are overexposed to U.S. subprime loans.”

The lingering effects of the crisis mean banks and brokerages need “massive” consolidation because of the glut of lending worldwide, Bernstein said.

Profit for U.S. banks and brokerages tumbled 94 percent in the second quarter from a year earlier, according to Bloomberg data. Financial stocks in the Standard & Poor’s 500 Index have tumbled 28 percent this year for the worst performance among 10 industry groups.

Source: Bloomberg

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