Traders linked some of Thursday’s losses in the financial sector to profit-taking ahead of key U.S.
In my opinion, the wave of writedowns will continue,” said Woolnough, whose fund is distinctly underweight financial stocks. Since then, prices of structured credit products and structured bonds have fallen further. “Until now, most of the writedowns have been based on market prices at end-2007. Richard Woolnough, manager of the M&G Optimal Income Fund at M&G Investments with some $325 billion in assets under management, addressed the same theme. It added: “This could again lead to concerns that those European banks which have not taken sufficiently conservative marks could again face writedowns.” “With (credit) indices such as the ABX and the CMBX finishing the (first) quarter significantly lower than both year-end and the end of February, further structured credit-related writedowns are certain to be a feature,” Lehman Brothers said, referring to the U.S. the UK banks remain highly leveraged to domestic credit, deposits and capital and are likely to continue to underperform until asset values near their bottom.”
Goldman Sachs downgraded Lloyds to “sell”, and Lehman Brothers, in a European banks sector note, said: “Higher credit costs will be the main driver of banks’ performance. JPMorgan slashed its 20 earnings per share forecasts for the Swiss bank by 36 percent and cut its target price to 45 francs from 55 francs.Īlso among financials, Britain’s Lloyds TSB fell 4.2 percent, French insurer AXA was down 3.5 percent and Royal Bank of Scotland shed 3.5 percent. WestLB cut its target price for UBS to 48 francs from 53 francs. “This is a challenge for a new management team against the backdrop of a difficult operating environment,” Fox-Pitt Kelton said, noting that “the end of writedowns is not guaranteed.” Fox-Pitt Kelton said UBS faced “operating challenges around cost cutting, staff departures and capital constraint.” UBS dropped 4.7 percent to 32.40 Swiss francs, contributing to a 1.9 percent slide for the DJ Stoxx European banks index. The FTSEurofirst 300 index of top European shares ended 0.4 percent lower at 1,312.10 points, having gained more than 4 percent over the past two sessions on hopes that the worst of the asset writedowns in the banking sector may be over.