City banks’ profits to suffer from credit crunch effect

City banks' profits to suffer from credit crunch effect

JP Morgan survey warns of huge City profit falls from exposure to sub-prime failures

Profits at the City of London banks are likely to be millions of pounds lower
than expected because of exposure to sub-prime derivatives, according to a
survey by US investment bank JP Morgan.

London will be the hardest hit financial centre in Europe as it has been at
the centre of developing mortgage-backed products. Trading in such products has
frozen after the sub-prime crisis in the US, as investors are no longer willing
to buy such products, reports the FT.

European banks will be hit harder than their US counterparts as their
reporting period for Q3 runs to the end of September, while the US banks
reported to the end of August, lessening their exposure to the credit crunch.

As the market for sub-prime instruments has dried up, the investment banks
will have to use complex modelling to find a fair value for the instruments to
book into their accounts.

Further reading:

Overview: nightmare on Wall St

Further writedowns expected for US
banks

US think-tank criticises ‘absurd’ fair
value

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource