RBS and Barclays could face heavy writedowns

8 November 2007

Royal Bank of Scotland (RBS) and Barclays may be forced to write down $4.4 billion in the second half of the year, it has been claimed.

Reported by Bloomberg, Antony Broadbent, an analyst at Bernstein in London, said that write downs could total $3.3 billion at Barclays and $1 billion pounds at RBS.

A worst case scenario would see them announce $11.7 billion each, Mr Broadbent said.

Hikes in borrowing costs, after a collapse in the US sub-prime mortgage market, have led other banks to announce write downs and losses totalling almost $20 billion, as well as a run on Northern Rock.

Barclays and RBS have seen their combined value wiped by about $58 billion, exceeding the value reduction of $9.6 billion pounds for Barclays and $8 billion for RBS.

Mamoun Tazi, an analyst at MF Global Securities, said: "The market re-rated the shares on buybacks, but the recent ABN deal confirmed that the bank is likely to continue to do deals at the expense of shareholder value."

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