Banks' Subprime Losses Top $500 Billion on Writedowns

Bloomberg on August 12 wrote that Banks' losses from the U.S. subprime crisis and the ensuing credit crunch crossed the $500 billion mark as writedowns spread to more asset types.

The writedowns and credit losses at more than 100 of the world's biggest banks and securities firms rose after UBS AG reported second-quarter earnings today, which included $6 billion of charges on subprime-related assets.

The International Monetary Fund in an April report estimated banks' losses at $510 billion, about half its forecast of $1 trillion for all companies. Predictions have crept up since then, with New York University economist Nouriel Roubini predicting losses to reach $2 trillion.

Auction-rate securities have begun adding to the losses as regulators and prosecutors force banks to buy back bonds they'd sold as safe investments. UBS set aside $900 million to cover potential losses from repurchasing the securities, while Citigroup Inc. and Wachovia Corp. estimated losses at $500 million each.

The collapse of the U.S. subprime mortgage market last year has saddled banks worldwide with $501 billion of losses from declining values of securities tied to all types of home loans and commercial mortgages as well as leveraged-loan commitments.

Banks and brokers have raised $353 billion of capital to cope with the writedowns, according to data compiled by Bloomberg. The gap between losses and capital infusions, which now stands at $148 billion, has regularly narrowed to about $80 billion as capital raising follows writedown announcements.

Here is the total write-downs and cap raises :

click to enlarge

click to enlarge

Here is the comment of Barry Ritholtz from The Big Picture:

Remember the good old days? Ahhh, a simpler time, when we were repeatedly told that sub-prime didn't matter, that it was contained, that the losses were a mere $60 billion dollars at most, and overall, this would have zero impact on the broader economy?

Only not so much.

We learned via the number crunchers at Bloomberg that the $500 Billion mark in losses and write downs has now been crossed

The $500 billion in losses don’t yet include any real Alt-A (option ARM) losses that were estimated as much as $1.6 trillion.

Related Posts :

1. Writedowns of Largest Banks Reach $274bn
2. Bank Collapse Update: $400 Billion of Writeoffs So Far, $600 Billion to Go (WM, WB, JPM, FNM, FRE)
3. Bridgewater warns Bank losses from credit crisis may run to $1,600bn

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