Citi Could Writedown $8bn More, Deutsche Writedowns Now $11bn
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And Merrill analysts have come out and said that they estimate Citi will writedown $6bn in the third period, falling into a loss as a result. The most dire prognosis, however, comes from Goldman analyst William Tanona, who has said that Citi has thus-far been 'far less aggressive in their marks on CDOs' than rivals. Based on the firm marking its CDO portfolio down to a similar level to Merrill Lynch (22 cents on the dollar), Tanona estimates that Citi would have to writedown some $16.2bn. Tanona said: 'Though Citi defends their marks, due to their earlier vintages and high concentration of commercial paper, we continue to believe they would struggle to obtain their prices in the marketplace today'.
The Wall Street Journal reports that Deutsche Bank posted a 63% fall in its second-quarter profit Thursday. The group's pretax net profit came in at $1.01bn, after $3.6bn in additional writedowns, which takes the bank's writedown total to just over $11bn since the credit crisis began to bite last year. The investment bank posted a $484.8m loss in the period. Deutsche CEO Josef Ackermann said: 'Looking forward, we remain cautious for the remainder of 2008. We will continue to strictly manage cost, risk and capital, and to reduce our exposure in key areas'.
The newspaper also reports that Julian Tzolov, a former broker at Credit Suisse, is thought to have left the US and 'fled' to his native Bulgaria, as prosecutors probe whether he and a former colleague may have misled investors who purchased auction-rate securities through the firm. It is unclear whether US authorities would be able to extradite a defendant in a securities-fraud case from Bulgaria.
The Financial Times reports that online broker E-Trade Financial has agreed to pay $1m to settle Securities and Exchange Commission charges that two of its units broke anti-money laundering rules.
Finally, Bloomberg reports that Connecticut has sued Fitch Ratings, Moody's and Standard & Poor's parent McGraw Hill, claiming that the firms have been giving municipal bonds lower ratings than comparable corporate or structured debt. Connecticut's Attorney General Richard Blumenthal said: 'We are holding the credit rating agencies accountable for a secret Wall Street tax on Main Street'.
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