U.S. Banks' Earnings May Fall 26% in 2008, Morgan Stanley Says

Discussion in 'Wall St. News' started by ASusilovic, Apr 28, 2008.

  1. U.S. banks' earnings may fall 26 percent this year and a further 15 percent in 2009, as credit continues to deteriorate and trim profit, according to analysts at Morgan Stanley.

    Bank earnings will decline by $17 billion this year and a further $13 billion in 2009, driven by higher borrowing expenses and bad loans, analysts including New York-based Betsy L. Graseck wrote in a note to investors today. Lenders will probably cut dividends and raise capital to offset the losses, she said.

    ``We are only in the 3rd inning of the credit cycle and expect it will be worse than 1990-91,'' Graseck wrote. ``Credit deterioration will accelerate and banks will raise more dilutive equity and cut dividends.''

    Banks are scaling back loans and raising cash amid a credit-market slump triggered by the collapse of the U.S. subprime mortgage market. The world's biggest financial firms have posted more than $300 billion in writedowns and credit losses in the past year and announced plans to raise more than $210 billion selling stakes.

    Earnings may fall further if the U.S. Federal Reserve doesn't cut interest rates, Graseck wrote.


    Selling into rallies ? Outsch !
  2. It's spelled O-U-C-H! :cool: