UK banks face further writedowns
RBS expected to writedown up to £1.9bn while A&L warns 2007 profits will be £55m lower
UK banks may be forced into further write downs against the values of some of
their high risk loans.
Alliance & Leicester and Royal Bank of Scotland are both set to reveal
the extent of their losses this week.
A&L is expected to write off a further £50m against its so-called ‘toxic
loans’ in the first half of next year, on top of the £55m charge announced last
week.
The bank issued a trading statement last week outlining the fall in the value
of its holdings of structured investment vehicles, collateralised debt
obligations and other complex financial instruments.
The bank announced a £40m write-off against SIVs but also revealed that
following the charge, the holdings of the instruments were in the books at £346m
– £52m more than their current market value of £294m.
RBS is likely to writedown up to £1.9bn, analysts say, on the back of the
recent turmoil in the markets.
Sanford Bernstein analyst Antony Broadbent predicted that RBS would announce
total writedowns of £1.6bn to £1.9bn for 2007, which included those for ABN
Amro.
But RBS writedowns on SIVs are expected to be ‘negligible’ according to
Sanford, since neither RBS nor ABN had material exposure to SIVs.
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