BofA Joins the Writedown Party, But is There More to Come?
Bank of America Corp. today announced it will take a pretax writedown of about $3 billion in the fourth quarter to reflect a drop in value of securities related to mortgages and will spend $600 million supporting in-house money-market funds that are exposed to structured investment vehicles.
The question remains, however, whether there is more to come.
CreditSights estimated BofA’s potential writedowns at $5.5 billion. In the same report, CreditSights put Morgan Stanley’s number at $3.8 billion and that company subsequently announced a writedown of $3.7 billion. Morgan Stanley put its total exposure at $6 billion, but only if the instruments lost all value.
BofA noted that market conditions could worsen and “there could be an additional diminution of value.”
Analysts have been concerned about losses from collateralized debt obligations backed by mortgages and other debt.
Fitch downgraded $37.2 billion of global CDOs to junk bond status. Moody’s downgraded $10.3 billion in October, and noted it had received “event-of-default notices” rpresenting $5.6 billion more.
Standard & Poors lowered its ratings on $1.92 billion in CDO tranches on Nov 5 and summarized its CDO ratings actions Nov 12.
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November 16th, 2007 at 9:16 am
[...] most widely read post, by far, was Wednesday’s BofA Joins the Writedown Party, But is There More to Come? Prompted by Bank of America’s $3 billion writedown, the post examined projections by CreditSights [...]
November 23rd, 2007 at 3:55 pm
[...] BofA Joins the Writedown Party was the top post of the week, closely followed by Signs Subprime Fallout Spreading to Commercial Real Estate. The ever-popular Subprime Mortgage Lending Primer came in third, and Larger CDO Writedowns to Hit European Bank Profits rounded out the “subprime top four.” [...]