Fears that banks could still be feeling the impact of the credit squeeze next Christmas drove down global shares after Goldman Sachs predicted a further $48bn (£24bn) of write downs by the end of 2008. Financial Times. Guardian
In London, the FTSE 100 index fell 2.7% to its lowest point since the credit squeeze began in August and wiping out all its gains on the year. The slump was prompted by fears over Northern Rock and a report from Goldman’s three leading banking analysts – the trio who foreshadowed Merrill Lynch’s write downs last month.
Goldman’s list of projected write downs was headed by Citigroup, with a $22bn write-off, split between $11bn in the fourth quarter of 2007 and for all of 2008. This month Citi said it expected to write down between $8bn and $11bn for the fourth quarter. The note took Citi’s shares down 5.9%, taking its loss for the year to more than 42%.
Goldman also expects write downs of $13bn for Merrill Lynch and $8bn at Morgan Stanley, shared over the final quarter of 2007 and for 2008.
'Our incrementally more negative view on the sector should have the most pronounced impact on Citigroup,' said Goldman. 'This firm lacks leadership at the present time and has a disproportionate amount of exposure to sub-prime mortgages and collateral debt obligations.’'