Macro
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| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
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| +0.20 | -0.36 | +0.10 | +0.15 | +0.15 | -0.48 | -0.64 | -0.77 | -0.81 | -0.86 | -0.62 | -0.68 |
The finance sector is under significant stress this month, driven by deepening losses in major institutions tied to the unraveling subprime mortgage market, exemplified by Merrill Lynch’s $8.4 billion write-down and UBS’s substantial loss. Citi’s profit warning underscores broadening concerns about near-term earnings across the industry. While the RBS-led consortium’s €71 billion acquisition of ABN AMRO signals aggressive expansion, it also amplifies fears of overreach amid deteriorating credit conditions, contributing to an overall bearish sentiment.
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HSBC has issued its first-ever profit warning, citing escalating losses from US subprime mortgages, leading to a 2.5% drop in shares. The bank raised its bad loan provisions to $10.6 billion, significantly above forecasts, highlighting its heavy exposure to risky US personal lending. This has broader market implications, spooking investors and affecting European and US banking stocks amid growing concerns over subprime market stability.
BNP Paribas suspended redemptions on three funds totaling €1.6 billion due to liquidity freezes in U.S. subprime-related securities, triggering broader market concerns. The move, alongside fund closures by other European banks, spooked investors, dragging down European equities and widening credit spreads. The ECB stepped in with emergency liquidity, signaling growing stress in interbank markets.
Countrywide Financial drew its full $11.5 billion bank credit line as liquidity dried up during the global financial crisis, following warnings of potential bankruptcy from Merrill Lynch. The move, coupled with First Magnus halting new mortgage funding, signals severe stress in the U.S. mortgage sector, threatening broader market stability and prompting a sharp stock decline for Countrywide. The actions highlight deteriorating confidence and constrained financing options across the industry.
Customers queued to pull savings from mortgage lender Northern Rock after it sought emergency Bank of England support when wholesale funding dried up. The televised run demonstrated how quickly the securitization freeze could topple funding-dependent banks.
Merrill Lynch posted a massive quarterly loss due to a $7.9 billion writedown on subprime mortgages and CDOs, far exceeding prior estimates, as deteriorating credit markets forced reevaluation of asset values. The surprise loss signals ongoing stress in credit markets, with implications for financial sector liquidity and investor confidence. Lower employee bonuses helped offset some losses, but the firm warns of continued uncertainty ahead.
UBS and Citigroup face significant losses due to U.S. subprime mortgage exposure, with Citi expecting a 60% drop in profits and UBS reporting a $690 million loss. The writedowns reflect broader credit market turmoil, leading to $3.4 billion in combined asset devaluations and 1,500 job cuts at UBS. Market volatility and rising loan-loss reserves are pressuring earnings across major financial institutions.
Citigroup CEO Charles Prince resigned following massive losses from bad debt, with the bank expecting $8 billion to $11 billion in additional writedowns. Former Treasury Secretary Robert Rubin will replace Prince as chairman, while Sir Win Bischoff becomes interim CEO, in a move aimed at restoring investor confidence amid declining profits and stock value. The leadership shakeup reflects broader turmoil in the financial sector, with implications for market stability and Citigroup's competitive standing.