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S & P: Bank Profits Could Crash 70%

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http://business.timesonline.co.uk/tol/busi...icle2351310.ece

The Times

August 30, 2007

S&P warns of investment bank fallout should 1998 be repeated

Patrick "Padders" Hosking
Profits at the big investment banks of Wall Street and the City of London will collapse by
70 per cent
in the second half if the credit crunch proves as fierce as in 1998, Standard & Poor’s said yesterday.

Looks like 1987 doesn't it? But much worse as the job losses then were primarily as a result of a bear market for stocks. When banks get into trouble.................... :o

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Guest vicmac64
http://business.timesonline.co.uk/tol/busi...icle2351310.ece

The Times

August 30, 2007

S&P warns of investment bank fallout should 1998 be repeated

Patrick "Padders" Hosking
Profits at the big investment banks of Wall Street and the City of London will collapse by
70 per cent
in the second half if the credit crunch proves as fierce as in 1998, Standard & Poor’s said yesterday.

Looks like 1987 doesn't it? But much worse as the job losses then were primarily as a result of a bear market for stocks. When banks get into trouble.................... :o

Music to my ears - now as a country we can once again get used to the FACT that to really improve our lot we've got to make lots of stuff and sell it to the rest of the world.

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The £14 million bonus figure touted earlier in the week looks in fact more like a wish list as I suggested....the old adage "if you rumour hard enough it might happen" looks like pie in the sky right now. The investment banks were the big time bonus payers. Most would have been paid in cash at 40% tax deduction. Gordo's tax teams were on to the 'smart' lot who rumour had it were being paid in such weird concoctions as vintage wine to avoid tax! Transfers from Bonus to Pension are usually tax free.

It looks as if people will be more concerned about having a job than caring about a bonus level. :huh::huh::huh:

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So their profits could drop 70% in the second half of the year.

That's profits. Not revenue. OK, they won't be happy, but they're still (according to this projection) making money. Hardly the end of the world for them. If true.

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Hardly the end of the world for them

The market will often penalise a stock when the profits stop rising. Investors' expectations of profit are dashed and they move the money somewhere else. Normally, however, the market will price the stock according to profit expectations shortly after the bad news is out. In other words, this 70% drop in profit will be factored into the equation over the next few months even before the actual drop in profit is reported. Unless the market is confident enough that the banks will be able to borrow enough to see them through the crisis.

Do many of these bonuses actually get paid in cash ?

They are usually paid in cash. And they are massive.

Edited by dellboy

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Music to my ears - now as a country we can once again get used to the FACT that to really improve our lot we've got to make lots of stuff and sell it to the rest of the world.

Now that is something we agree on :rolleyes:

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Now that is something we agree on :rolleyes:

Not sure what we are going to make though, seeing as those nice City guys have "hollowed out" the economy and moved a lot of our capacity overseas. The thing to worry about in the future is say a revaluation of the Yuan and all those nice cheap consumer goods suddenly get expensive.

Hair cut anyone?

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Music to my ears - now as a country we can once again get used to the FACT that to really improve our lot we've got to make lots of stuff and sell it to the rest of the world.

can't see this happening anytime soon. we're stuffed

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Guest Bart of Darkness
That's profits. Not revenue. OK, they won't be happy, but they're still (according to this projection) making money. Hardly the end of the world for them. If true.

I'm sure the bigwigs and any shareholders of the various investment banks concerned will be suitable reassured by such an argument.

:rolleyes:

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I'm sure the bigwigs and any shareholders of the various investment banks concerned will be suitable reassured by such an argument.

:rolleyes:

I think you are right. The banks have grown huge and fat on a derivatives market that in recent weeks has all but collapsed .. disapeared. They are like a car factory where no one wants cars anymore.

So unless they can invent another fake/ponzi/fraud/derivative system (and I suspect that after the aftermath there will be legislation to outlaw such a thing) they are going to have contract quite a bit, and go back to legitimate banking activities.

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So unless they can invent another fake/ponzi/fraud/derivative system (and I suspect that after the aftermath there will be legislation to outlaw such a thing) they are going to have contract quite a bit, and go back to legitimate banking activities.

Much as I'd like to see some well-earned Schadenfreude hitting the banks, I doubt that the loss of 70% of half a year's profits (if that even happens) will lead to the 'tens of thousands of job losses' postulated in the sub-title of this thread - except maybe as a convenient excuse for offshoring more back-office staff.

And the next scheme is probably already in the pipeline. Like all the others before it, we just can't see it yet.

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Profits at the big investment banks of Wall Street and the City of London will collapse by 70 per cent in the second half if the credit crunch proves as fierce as in 1998, Standard & Poor’s said yesterday.

I think that this statement will turn out to be fairly accurate because:

a. S&P have recently had a lot of bad publicity for having such a pivotal role in this whole mess. Some heads rolled yesterday. They will want to try to ensure that any forecasts they release will be as accurate as possible to claw back some of their reputation.

b. A friend of mine in the investment banking industry quietly said to me that they are going to have a bad quarter. He didn't quantify how much, but he said that the losses were going to be "terrible". I think that 70% of profits lost sounds about right. The immediate effect is that the FTSE will experience a temporary correction in the second half of September in sympathy to these results. However, don't be caught out with the bounce back up again. September will not be the month when the big one comes

Best,

L

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The £14 million bonus figure touted earlier in the week looks in fact more like a wish list as I suggested....the old adage "if you rumour hard enough it might happen" looks like pie in the sky right now. The investment banks were the big time bonus payers. Most would have been paid in cash at 40% tax deduction. Gordo's tax teams were on to the 'smart' lot who rumour had it were being paid in such weird concoctions as vintage wine to avoid tax! Transfers from Bonus to Pension are usually tax free.

:huh::huh::huh:

nope they dont pay 40% tax on their bonus, they get paid in other forms such as loans, shares etc..

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http://business.timesonline.co.uk/tol/busi...icle2358010.ece

Savills, one of the City’s largest property agencies, made the prediction in a “worst-case” scenario for the lettings market. It assumes that a dramatic fall in profits in the big investment banks would force them to cut back on their demand for space.

City vacancy rates are at a near-record low, but Savills predicts that they could hit the 10 per cent mark in 2008 and 2009 just as a number of office schemes come to completion and work on others is due to start.

That could trigger a sharp fall in rents as landlords struggle to let empty new buildings. Prime City rents have risen from about £40 a square foot in 2003, when there was the last glut of unlet space, to nearly £65 today. Earlier this year agents were predicting that rents would rise to £70 and above in 2007 and 2008 before levelling off.

Separate figures from agents at CB Richard Ellis revealed that the City now accounts for a little over half of the Central London construction total.

Yikes.

Edited by Ash4781

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The London Bridge Tower (aka the Shard) is in difficulties due to funding. Also HSBC has problems with HSBC Tower in Canary Wharf which it sold off to a spanish property group recently. But it had to lend the Spanish the money to buy it and is now stuck with that loan on its balance sheet, as there is no interest the market for securitising the loan.

Its probably bad news for the "Walkie Talkie" and "The Cheese Grater" now :blink:

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