Total global write-offs at financial institutions are expected to reach $400 billion by the end of the year according to one researcher.
Analysts led by Jack Malvey of Lehman Brothers said the current tally of global financial institutions' writedowns is nearing $300 billion, which includes recent disclosures from UBS AG. The team says this is far less than the Himalaya-like guestimates made by other analysts, which range from $600 billion to $1.2 trillion.
Lehman's estimate is lower than that offered by UBS AG in February, which said global losses and writedowns will probably rise to US$600 billion amid a credit crunch sparked by last summer's collapse in the United States subprime mortgage market. Banks have sought to raise new capital by selling units and equity stakes to ease their cash shortage.
Capital destruction at financial institutions has been partially offset by new equity infusions, the analysts wrote. Subsequent quarters likely will see continued writeoffs at a slackening pace.
Citigroup Inc and Merrill Lynch & Co are among some of the institutions who've sought capital infusions, the Lehman Brothers' note said. Cash infusions worth about US$182 billion have limited the capital decline across the sector.