Banks slimming down to offset losses

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Scott Jagow: The investment bank Merrill Lynch reports second quarter profits today and more bank reports will be rolling in -- It's okay if you want to wince.

Amy Scott tells us what banks might do to turn things around.

Amy Scott: Banks struggling to absorb subprime mortgage losses have several options. They can raise money from shareholders by selling stock. That's getting harder to do as bank shares tumble. They can also sell assets. Analysts say Merrill Lynch may unload some or all of its stakes in media company Bloomberg LP and asset manager BlackRock. Last week, Citigroup announced the sale of its German consumer banking unit.

Jon Fischer with Fifth Third Asset Management expects to see other banks slim down too.

Jon Fischer: The list of financial institutions that need to raise capital is very, very long.

Analyst Dick Bove with Ladenburg Thalman doesn't expect a big fire sale. He says if you don't count the loan losses, the banking industry is in pretty good health.

Dick Bove: At some point, the loan losses will start to come down and then the earnings will be explosive for these companies.

We're not there yet, Bove says. As big banks start reporting their second quarter earnings this week, he's expecting some dismal results.

In New York, I'm Amy Scott for Marketplace.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.
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Why are all the analysts, journalists and current-event-experts coming out of the woodwork now in 2008?

It is unfortunate and pathetic to find that not even a handful of analysts have been honest and forthcoming in pro-actively discussing numbers relating to financial industry in general, and problem banks in particular.

Even now Moodys and other such firms are being used to provide ratings! Why not just publish the financial numbers about the firms that are being rated? Individuals can crunch numbers, and figure it out for themselves.

Q. Does the Fed work for the banks or for US citizens?


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