Assets valued, market unsure
(18 June 2008 – USA) While the big banks worldwide seek to revalue their assets and assure shareholders of their confidence, markets are still showing signs of credit fears.
US Securities company, Lehman Brothers, has reported confidence in asset valuation following large credit losses. The company announced losses of US $2.8 billion (A$3 billion) in the most recent quarter.
Lehman Brothers' chief executive officer, Richard Fuld, declared his confidence in the valuation of the company's mortgage assets after reducing the holdings by 20 percent in the second quarter.
The main focus of his explanation was to reassure investors, with much of the market losses coming from speculation around the value of assets.
He said that their core business and strategy are sound and, even after the mortgage business reductions, he believes in the model and viability of the company.
Having reduced US $147 billion in assets during the quarter, equity analysts are now beginning to believe that the assets are well valued.
Despite the assurance by the big financial institutions, sentiment will not turn around until that market is sure that losses have been contained. Deutsche Bank analyst Mike Mayo said that Lehman likely will only face another US $2 billion in credit-related write-downs, declining by year end.
Generally, Goldman Sachs analysts said that banks' credit losses will accelerate into the third quarter and not peak until the first quarter of 2009. To offset these loses, banks will need to raise another US$65 billion in capital at high cost to their shareholders, they concluded.
Lehman Brothers' chief executive officer, Richard Fuld, declared his confidence in the valuation of the company's mortgage assets after reducing the holdings by 20 percent in the second quarter.
The main focus of his explanation was to reassure investors, with much of the market losses coming from speculation around the value of assets.
He said that their core business and strategy are sound and, even after the mortgage business reductions, he believes in the model and viability of the company.
Having reduced US $147 billion in assets during the quarter, equity analysts are now beginning to believe that the assets are well valued.
Despite the assurance by the big financial institutions, sentiment will not turn around until that market is sure that losses have been contained. Deutsche Bank analyst Mike Mayo said that Lehman likely will only face another US $2 billion in credit-related write-downs, declining by year end.
Generally, Goldman Sachs analysts said that banks' credit losses will accelerate into the third quarter and not peak until the first quarter of 2009. To offset these loses, banks will need to raise another US$65 billion in capital at high cost to their shareholders, they concluded.
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