Big banks announce writedowns that swell total to $120bnProfits at the US's second and fourth largest banks, Bank of America
Bank of America (NYSE: BAC TYO: 8648 ) is the largest commercial bank in the United States in terms of deposits, and the largest company of its kind in the world. and Wachovia, have been all but wiped out by the deepening sub-prime crisis with both companies yesterday announcing multibillion-dollar writedowns.
The news came as Ambac Financial, which insured some of the bonds based on sub-prime assets, hoisted the "for sale" sign after announcing its first annual loss in 37 years.
Ambac is one of the monoline insurers that insure the bonds issued by governments and municipal authorities to fund major projects such as hospital and road building. But their more recent move into insuring financial instruments based on sub-prime mortgages has raised fears that they are facing huge claims.
Last week Ambac's chief executive left the business after it was forced to pull a $1bn emergency fundraising at the last minute. Ratings agency Fitch sent the stock into a tailspin tail·spin
1. The rapid descent of an aircraft in a steep, spiral spin.
2. Informal A loss of emotional control sometimes resulting in emotional collapse. by downgrading its view of the company's creditworthiness Creditworthiness
The condition in which the risk of default on a debt obligation by that entity is deemed low.
Eligibility of an individual or firm to borrow money. .
Moody's Investors Service Moody's Investors Service
A leading global credit rating, research and risk analysis firm.
Moody's Investors Service
A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. and Standard & Poor's are reviewing their ratings. But Standard & Poor's yesterday downgraded its ratings on some of the European instruments insured by Ambac, including bonds issued by the London Underground The London Underground is an underground railway system - also known as a rapid transit system - that serves a large part of Greater London, United Kingdom and some neighbouring areas. It is the world's oldest underground system, and is one of the longest in terms of route length. contractor Tube Lines.
Announcing an annual loss of $3.2bn (£1.63bn), as a result of a $5.2bn writedown yesterday, the company admitted it was exploring "strategic alternatives" to bolster its finances. Analysts took the comment to mean Ambac is up for sale.
Bank of America announced a 95% drop in fourth-quarter profits to $268m after writing $5.3bn off the value of its assets. Over the last three months of the year the US's second largest bank reported trading account Trading Account
1. An account similar to a traditional bank account, holding cash and securities, and is administered by an investment dealer.
2. An account held at a financial institution and administered by an investment dealer that the account holder uses to employ a losses of $5.44bn. It was "easily the toughest environment since I have been chief executive", said Kenneth Lewis, who took over in 2001.
Wachovia announced fourth-quarter profits of $51m, down 98% on the same period the previous year. It reported a $1.7bn loss on financial products, including sub-prime mortgage investments.
The results follow news this month from market leader Citigroup of an $18bn write-off, leading to the biggest loss in the firm's 196-year history. All told, the world's big banks and broking Bro´king
a. 1. Of or pertaining to a broker or brokers, or to brokerage.
Redeem from broking pawn the blemished crown.
- Shak. houses have written off an estimated $120bn since the summer.