01.07.08

Update subprime bankparade IX with a big smile!

Posted in bank, business risk, credit risk, enterprise risk, liquidity risk, operational risk tagged , , , , , , , , , , , , , , , , , , , , , , , , at 6:21 pm by peter@riskfriends.net

I’ve been following subprime for some time now. To freshen things up I’ve included a link to youtube
with a really funny and simple explanation what the subprime crisis is all about.

Tracking impact of the subprime crisis remains interesting, so I’ve updated the list of reported impact of and reactions to subprime problems. What at this stage is not very clear what costs central banks make to avoid a systemic crisis and who in the end will have to pay for this. The FED and the European Central Bank have been throwing in huge amounts of dollars and euros to avoid a financial and economic crisis. I find it difficult to believe this will work in the US where the problems are between home owners and banks. In Europe consumers are probably somehow better protected. European banks have also been impacted, but not to the extend (with the exception of UBS) as American banks.

I expect banks better prepare to be able to deliver high quality near real time risk reporting. Central banks, rating agencies, analysts and investors should and probably will demand more transparency with regard to risk transfer. This will have to be accompanied with public insight in what scenario’s have been covered. Another question that needs to be answered is how “guarantees” are priced. Risks are transferred to insurers, but the backing liquidity is by far not enough to really cover major events. The value of this “insurance” is severely overestimated in the price of funds and the rating of agencies. Banks owning “insured” investments are rewarded with reduced capital requirements. Banks, insurers, rating agencies and regulators all failed to identify the shortcomings in the identification and thus mitigation of the emerged risks.

This week a Dutch investigation executed by an organization of home owners proved that also in the Netherlands mortgages are sold without informing buyers properly. Selling higher mortgages than customers can afford is also common practice in the Netherlands. Another interesting research showed different approaches consumers take when making important financial decisions. This research showed that more than 25 percent of buyers are not interested in the long term impact of their decision. They find the short term convenience much more important and totally rely on the recommendation of the sales person. Dutch regulators are increasing pressure to improve the quality of information provided to potential buyers. For a large segment of buyers this will not result in better buying decisions.

And here you find the list with the addtions of the last few weeks. Although this list is limited to banks it is clear that insurers, news papers, real estate inveztors and home builders are impacted also.
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Date

Organization

Subprime news

Jan03

State Street

$ `0.28 billion charge and $ 0.68 provisioning legal
claims.

Dec24

Merrill Lynch

$ 7.5 billion acquired selling shares 13% below market
value.

Dec21

Canada

Restructured $33 billion swappin short term to long
term.

Dec21

FED

Fed guarantees unlimited relieve via biweekly Term
Auction Facility (TAF).

Dec20

MBIA

Bonds insurers $ 31 billion exposure and rating
concerns reported.

Dec20

Credit agricole

$ 3.5 billion write down, 40 % related to ACA.

Dec20

Bear Stearns

$ 0.85 billion loss and $ 1.9 billion write down
failing a $ 1.2 billion estimation.

Dec19

CIBC

Worries about $1.75 billion “guaranteed” CDO’s. Lehman
also makes statement about concerns regarding insurers ability to deliver.

Dec19

Citi

$ 3.5 billion cash acquired.

Dec19

Wachovia

$ 2 billion cash acquired.

Dec19

Goldman Sachs

$ 2.75 billion cash acquired.

Dec19

UBS

$ 3 billion cash acquired.

Dec19

JP Morgan Chase

$ 3 billion cash acquired.

Dec19

Morgan Stanley

$ 9.4 billion write down, $5 billion capital injection
from Chinese investor. Although the write down was 3 times the amount
foreseen by Morgan, investors are trusting management.

Dec19

FGIC

Bond insurer on Fitch watch list, capital adequacy at
risk due to exposure SF CDO and RMBS. $1 billion short for an AAA rating.

Dec18

ECB

Unlimited funds made available to ease credit crunch at
below market rates. Action follows on $40 billion coordinated injection by
the Fed, ECB, BoE,BoC, Swiss national bank.

Dec17

Centro

76 percent drop in market capitalization, funding
problems for property trusts.

Dec14

Lehman

Only a 12 percent profit drop in 4th
quarter,only $ 0.83 billion write off.

Dec14

Citi

Citi’s senior debt rating to Aa3 from Aa2 and lowered
the Bank Financial Strength Rating of Citibank NA to B from A-. Citibank’s
rating for long-term deposits and senior debt was lowered to Aa1 from Aaa.

Dec14

Citi

$49 billion added to balance sheet (SIV)

Dec12

Citi

$15 billion downgrade SIV

Dec 12

Lehman

12%profit drop, no write offs,no closure of SIV’s

Dec 10

Fannie Mae

Expects $5.5 billion loss next few years.

Dec 10

Freddie Mac

Expects $7.5 billion loss next few years.

Dec 10

BoA

Closes investment fund, value of assets dropped from
$40 billion to $12 billion in a few months.

Dec 10

Washington Mutual

Closing 60% of home loan centres, 3000 jobs lost,
closure of subprime and investment broker unit, saleof $3.7 billion preferred
stock and 73% cut of dividend.

Dec 10

Citi

Take over speculations are starting up.

Dec 10

UBS

$10 billion write off announced. Capital ratio’s
managed via $ 12 billion capital attractions from Singapore and the middle
east.

Dec 6

Rabo

Adds $7.6 billion to its balance sheet after selling
half of the assets from Tango Finance.

Dec 6

Citi

Moody’s downgrades 52 tranches or groups of bonds
issued by the mortgage unit

Dec 6

RBS

$2.6 billion and $ 0.6 ABNAMRO write off beating market
expectations.

Dec 6

Local government

Various states and cities report impact from degraded
SIV’s. Panic resulting in withdrawal of investments resulting in liquidity
problems. Reported were Florida, Connecticut, Montana and some cities in Scandinavia.

Dec 5

Standared chartered

Adding $ 1.7 billion of whistlejacket SIV to its
balance

Dec 3

WestLB

German bank guarantees $36 billion invested in SIV’s

Dec 3

H&R Block

$ 0.4 billion write off, closing Option One, 600 jobs
lost. Effort to sell unit failed.

Dec 3

RBS

$ 4 billion expected.

Dec 1

Morgan Stanley

CEO Cruz leaves

Nov29

Terra securities

Norwegian brokerage bankrupt,Citi connection.

Nov29

BoA

$ 1 billion write off Countrywide investment

Nov29

Florida

$ 8 billion run on the investment fund

Nov29

IKB

$ 9 billion rescue costs provided by German banks.

Nov28

Bear Stearns

1500 jobs in total lost, about 10% of work force.

Nov28

Freddie Mac

$ 6 billion sale of preferred stocks, dividend
reduction of 50 percent

Nov27

Citi

$ 7.5 billion sale .

Nov26

GMAC

$ 1.6 billion so far and more to come.

Nov26

Citi

45.000 jobs at risk in addition to previously announced
17.000 jobs. Almost 20% staff reduction this year.

Nov26

JP Morgan

100 jobs gone and CRO replaced

Nov26

HSBC

$ 35 billion injection to protect SIV’s.

Nov23

News

Delinquency rates rising for real estate and credit
card

Nov22

News

FSA sees $11 billion exposure for Japanese banks

Nov21

News

Fitch downgrades $30 billion CDO’s.

Nov21

MGIC

SEC inquiries, restructuring via C-BASS $467 million .
$ 0.5 billion difference with last years 3rd quarter results.

Nov21

Radian

SEC inquiries, restructuring via C-BASS $467 million
and selling service units to raise money. Almost $0.8 billion difference with
last years 3rd quarter results.

Nov21

AIG

Derivative lawsuit started,accusations of concealing
information and personally selling shares.

Nov21

Countrywide

Denying bankruptcy threats.

Nov20

News

Insured CDO’s at risk due to possible downgrade of
insurance companies resulting in inability to make termination payments and
effectively wipe out these insurers and subsequently more write offs by
banks.

Nov20

Citi

Predicted $15 billion write offs next 6 months,
downgraded

Nov20

Countrywide

Liquidity concerns, signs of bankruptcy

Nov20

Freddie Mac

$ 2 billion write off, liquidity problems

Nov20

Swiss re

$ 1 billion write off

Nov16

Citi

$ 11 billion write offexpected in 4th quarter

Nov16

News

Banks reassuring investors,IMF and OECD issue warnings.

Nov16

Novastar financial

$ 0.4 billion write off,probably expelled from NYSE

Nov16

UBS

$ 7 billion write off.expected in 4th quarter

Nov15

Barclays

$ 2.7 billion write off.

Nov14

Bear Stearns

$ 1.2 billion write off.

Nov13

BoA

$ 3.3 billion write off.

Nov13

HSBC

$ 3.4 billion write off.

Nov13

News

$ 3 billion exposure for director-and-officer
insurances, claims resulting from lawsuits.

Nov13

RBC

$ 0.4 billion write off.

Nov12

Blackstone

$ 0.8 billion write off

Nov12

Citi

$ 25 billion exposure resulting from liquidity puts,
survival concerns.

Nov12

Etrade

$ 3 billion exposure and ananalyst report resulted in a
60% price drop of shares and concerns about going bankrupt

Nov12

Metlife

Insurance company with $ 91.3 billion mbs exposure

Nov12

Principal Financial group

Insurance company with $ 12.3 billion mbs exposure

Nov 9

CIBC

Canadians reporting $ 0.5 billion write offs, more
Canadians to follow.

Nov 9

HSBC

Another 120 jobs in addition to the 750 reported in
August are lost

Nov 9

JP Morgan

4th quarter warnings, exposure $ 8 billion.

Nov 9

Wachovia

$ 1.6 billion subprime loss

Nov 8

Merrill

SEC starts investigation investments

Nov 8

Morgan Stanley

$ 3.7 billion subprime write off

Nov 8

News

RBS expects another $250 to $500 billion write offs in
level 3 assets in addition to subprime write offs

Nov7

Bear Stearns

Expected write offs 4th quarter $3.9 according to
CreditSights

Nov7

BofA

Expected write offs another $3 to 6 billion, according
to Deutsche Bank

Nov7

Citi

Shareholders lawsuits

Nov7

Commerzbank

$337 million write off

Nov7

Goldman

Expected write offs 4th quarter $5 according to
CreditSights

Nov7

Lehman

Expected write offs 4th quarter $3.9 according to
CreditSights

Nov7

Merrill

Expected write offs 4th quarter another $9.4 according
to CreditSights

Nov7

Morgan Stanley

Expected write offs another $4 to 6 billion, according
to Deutsche Bank

Nov7

News

Level 3 assets concerns, $400 billion downgrade
resulting from adjusted ratings.

Nov5

Market news

Asian markets drop sharply (5%)

Nov 3

Bear Stearns

CEO accused of inappropriate conduct

Nov 3

Citigroup

Write off $ 11 billion in addition of the $ 6.8 billion
reported 3 weeks ago.

Nov 3

Merrill

Merril not aware of inappropriate transactions, not
denying it.

Nov 2

Credit Suisse`

2.2 billion Swiss francs write down

Nov 2

First American

Washington Mutual Accused for inflating mortgage
appraisals

Nov 2

UBS

Another $ 8 billion expected in addition to the $3.8
billion

Nov 1

Citi

Downgrade $30 billion expected loss

Nov 1

Deutsche bank

3,2 billion loss, but in control, appraised

Nov 1

Federal reserve

41 billion injection

Nov 1

State Street

$2,6 billion loss, law suits wrong investment advice

Oct 31

General Electric

1 billion at stake, mortgage staff cuts

Oct 31

Merrill

Lawsuits by shareholders

Oct 31

UBS

3,68 billion loss in francs

Oct 30

Countrywide

Offering cds at highest rates

Oct 29

Bank of China

$7,9 billion mortgage write off

Oct 29

HSBC

Sells mortgage unit, $795 million

Oct 29

Market news

Double digit price drop California housing

Oct 29

Market news

80% price drop mortgage backed securities

Oct 29

Perpetual

Cut first-half profit forecast by 5%, spooked investors

Oct 28

Countrywide

Analysts stating CEO is telling lies

Oct 28

Fremont Inv & Loan

Approved fast foreclosures

Oct 28

Market news

Foreclosures within 11 to 14 months

Oct 28

New Century

Fin Corp Approved fast foreclosures

Oct 28

WMC Mortgage

Approved fast foreclosures

Oct 27

Countrywide

CEO accused for dumping stocks

Oct 26

Countrywide

Largest home lender, $1.2 billion loss

Oct 26

Moody’s

Cut the ratings of collateralized debt obligations tied
to $33 billion of subprime mortgage securities

Oct 26

S&P

Lawsuits, wrong rating mortgage backed securities, conflict
of interests, rating related to fees

Oct 25

AIG

Analysts predicts $9,8 billion loss

Oct 24

News

$400 billion write off prognoses

Oct 22

BoA

$750 million loss, provisions up $1,5 billion, profit
drop with 94%, 3000 jobs lost, blaming risk mgmt.

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