Global Banks Write Down, Don't Say Crisis Over [Housing Tracker]

Includes: DB, HSBC, JPM
by: Judy Weil

Global Subprime Fallout

Subprime Woes Continue To Hit HSBC. “HSBC Holdings PLC (HBC.A), Europe's biggest bank by market value, reported the steepest earnings decline since 2001 on record subprime mortgage defaults in the U.S. Net income for the six months ended June 30 dropped 29%to $7.7 billion US, or $0.65/share, from $10.9B, or $0.94, a year earlier, the company said Monday. Chairman Stephen Green called the outlook "highly challenging." HSBC, the first European bank to take losses on U.S. subprime mortgages, set aside an additional $10.1B this year.” (Calgary Herald, Aug. 5th)

Japan's Mitsubishi UFJ Profits Down 66 Percent. “Japan's biggest banking group Mitsubishi UFJ Financial said Tuesday its net profits plunged 66% in Q2, hit by weak markets and the US financial crisis. Net profit tumbled to ¥51.2 billion ($474 million) in FQ1’08 from ¥151.3B a year earlier. Pre-tax profits plunged 66.9% to ¥96.9B as revenue declined 7.3% to ¥1.44 trillion. The megabank said it had lost ¥16B in the quarter offloading residential mortgage-backed securities, which have plunged in value because of a wave of defaults by US homeowners.” (AFP, Aug. 5th)

Rescued Bank Northern Rock Posts £592m Loss. “Nationalised British bank Northern Rock reported on Tuesday a net loss of £592 million pounds (€746M, $1.16 billion) in H1’08 as it repaid a chunk of a large government loan. The loss figure from the bank, which was rescued after falling to the subprime crisis, compared with profit after tax of £188M in H1’07… Northern Rock, once Britain's fifth-biggest home loan provider, was taken into public ownership by the government in February after it failed to find a suitable buyer from the private sector.” (AFP, Aug. 5th)

Standard Chartered Net Rises 31%, Beating Estimates. “Standard Chartered Plc, the U.K. bank that earns most of its money in Asia, said first-half profit rose 31%, helped by corporate lending in India and Hong Kong… CEO Peter Sands said Standard Chartered, the first London-based bank to report higher first-half earnings, expects a moderation “rather than an interruption” of growth in Asia. The results come a day after HSBC Holdings Plc, which makes two-thirds of its money in Asia, posted lower profit amid subprime mortgage losses in the U.S.”  (Bloomberg, Aug. 5th)

Jpmorgan Plans $1 Bln Asia Property Spree. “JPMorgan (NYSE:JPM) plans to invest more than $1 billion in Asian real estate over the next three years, hoping to fill a gap as Indian and Chinese developers crave funds and lenders and rival investors recoil from property markets. The investment bank, which has fared better than some Wall Street rivals because of smaller exposure to subprime mortgage investments, is using its global special opportunities group to finance Asian property firms and their projects.” (Reuters India, Aug. 5th)

Société Générale Posts Steep Loss On Write-Downs, But Shares Rally. “The French bank Société Générale, which lost nearly €5B in a trading scandal at the start of the year, said Tuesday that net profit fell 63% in Q2, on write-downs and after its investment banking unit posted a loss. Net profit dropped to €644M, or $1B in Q2 from a profit of €1.74B a year ago. H1’08, net was down 45% to €1.74B from €3.17B a year earlier. Still, shares of Société Générale, which have performed well in recent weeks, rose 5.5% in Paris trading to €62.65 after as the net figures beat forecasts.”  (Int’l Herald Tribune, Aug. 5th)

China Development Bank Interested in Dresdner Bank. “China Development Bank is competing with Commerzbank AG to buy Allianz SE's Dresdner Bank, Germany's third-largest lender by assets, three people familiar with the matter said… Chinese companies and funds spent $19.3 billion buying stakes in Blackstone Group LP, Morgan Stanley, Barclays Plc, Fortis and Standard Bank Group Ltd. since May 2007. Those investments are now worth about $7 billion less on paper... Dresdner would give a buyer €500B euros of assets, more than 1,000 branches and 6.3 million retail clients. Allianz wants to sell the securities unit Dresdner Kleinwort, which has contributed to more than €2.5B of subprime-related writedowns in the past year.” (Bloomberg, Aug. 5th)

Deutsche Bank's Net Slides 63%. “Deutsche Bank AG reported a 63% decline in second-quarter net profit, on further asset write-downs, lower revenue, higher credit-risk provisions and a loss on its trading book... Still, Germany's largest bank by market capitalization… managed [a] net profit of €649M ($1.01B). That was down from €1.78B in Q2’07, but significantly above the average forecast of €426M. Second-quarter earnings were hit by €2.3B in markdowns related to the crisis, after €2.7B in Q1, bringing the bank's total markdowns to around €7.3B since the start of the crisis. “Looking forward, we remain cautious for the remainder of 2008," Chief Executive Josef Ackermann said.” (WSJ, July 31st)

Denmark Wins Approval To Rescue Bank. “Denmark won European Union permission Thursday to rescue a bank hit hard by the subprime housing crisis. EU regulators said they would allow the country's central bank to give a liquidity facility to Roskilde Bank, one of Denmark's largest, to cover potential losses on loans to home buyers with poor credit. It is the first time Denmark has stepped in to save a bank, mirroring the Bank of England which moved last year to rescue the troubled mortgage lender Northern Rock” (Int’l Herald Tribune, July 31st)


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