SAN FRANCISCO (MarketWatch) -- Banking giants J.P. Morgan Chase & Co. and Bank of America Corp. said Friday that turbulent credit markets will likely dent fourth-quarter results.
BAC 43.98, +0.48, +1.1%) announced that dislocations in the market for collateralized-debt obligations, or CDOs, will knock earnings for the fourth quarter.
Bankers' write-downs
Citigroup *$13.7 bln
Merrill Lynch $8.4 bln
Morgan Stanley $4.6 bln
UBS $3.7 bln
Deutsche Bank $3.1 bln
Credit Suisse $1.9 bln
JP Morgan $1.6 bln
Goldman Sachs $1.5 bln
Wachovia Bank *$1.1 bln
Bear Stearns $0.7 bln
Lehman Bros. $0.7 bln
Total: $45 bln
Data: Companies, since Q3 * Est."It may take more time for the markets to return to a more normal environment with tighter credit spreads and greater liquidity," the bank said in its quarterly filing with the Securities and Exchange Commission.
Bank of America disclosed that it provided more than $15 billion of liquidity support for commercial paper sold by CDOs. A net $9.8 billion of that is mainly backed by subprime residential-mortgage securities, it added. The bank also has more than $3 billion of exposure to CDOs through its structuring, warehousing and trading activities, it disclosed in the filing.
JPM 42.31, -0.30, -0.7%) said that some of its subprime-related positions could be hit by turbulent conditions in credit markets in the fourth quarter.
"The firm's CDO and subprime-mortgage warehouse and trading positions could also be negatively affected by market conditions during the fourth quarter of 2007," the bank said in its quarterly filing with the Securities and Exchange Commission.
In the third quarter, J.P. Morgan noted that it took a $339 million write-down (net of risk management results) on $6.8 billion of CDO warehouse and unsold positions.
(I am thinking that JPM will be writing off another billion or so of this) |
