Global Subprime Losses May Top $450 Billion

A recent report from Advisen LTD pegged international losses from the U.S. subprime mortgage meltdown so far at $173.2 billion as of Jan. 8. The estimate was based on losses reported by 112 companies.

“The write-downs represent only a small percentage of the total subprime exposure of these companies,” Advisen, which analyzes the insurance industry, stated in the report. “The 112 companies identified by Advisen as experiencing write-downs have reported subprime-related assets of $440 billion. However, not all of the companies have reported their total exposure to total collateralized debt obligations and other subprime related investments.”

The New York-based firm estimated the 112 companies analyzed might have as much as $1.2 trillion in subprime-backed CDOs and other securities.

Among U.S. companies outlined in the analysis that reported at least $1 billion in subprime-related losses were ACA Capital Holdings, with $1.7 billion in writedowns; AIG, at $1.7 billion; Banque AIG, at $1.4 billion; Bear Stearns, which reported $2.75 billion; Commerce Bank, at $1.2 billion; Countrywide Financial Corp., which said losses total $1.0 billion; E*Trade has seen $2.6 billion in losses; Fannie Mae, which has reported $1.4 billion in writedowns; Freddie Mac’s, whose charges have been $8.1 billion; GMAC, which has seen $1.6 billion in charges; Goldman Sachs’, with subprime losses amounting to $3.7 billion; Legg Mason, which reported $1.1 billion; Lehman Brothers, which has lost $3.5 billion; MBIA Inc., with charges of $8.1 billion; Morgan Stanley, which has reported $10.6 billion; PNC’s, with losses adding up to $1.5 billion; Wachovia, which has seen $1.34 in charges; and Wells Fargo, which reported $1.4 billion in losses.

Capital One charges were noted at $1.2 billion, though it has now indicated it increased its fourth quarter provision for expenses and additional legal reserves by $1.9 billion.

Citigroup, which had $14.6 billion in writedowns, according to Advisen, has subsequently reported $15.0 billion in fourth quarter subprime-related charges.

JPMorgan Chase’s writedowns were $1.6 billion in the study, while the company recently reported fourth quarter earnings were impacted by a $1.3 billion markdown on subprime positions.

Merrill Lynch’s writedowns totaled $8.4 billion, the analysis said, but it has since reported $11.5 billion in writedowns and credit valuation adjustments of $2.6 billion.

Washington Mutual had losses totaling $1.6 billion in the study, though it later reported $1.6 billion in after-tax home loan related fourth quarter charges.

Sovereign Bancorp, which was not included in the report, has said it expects a nearly $1.6 billion non-cash charge in the fourth quarter.

In Canada, Bank of Nova Scotia’s subprime losses totaled $3.2 billion, while CIBC had $2.0 billion, according to Advisen. Conventree’s writedowns were $2.0 billion and Imperial Bank of Canada indicated its charges were $2.5 billion.

In the United Kingdom, Barclays said it has lost $3.3 billion from subprime investments; HBOS has indicated charges of $1.6 billion; HSBC losses aggregate to $3.4 billion; and Royal Bank of Scotland has reported $3.0 billion in charges, Advisen noted.

Over in France, the study indicated Credit Agricole has reported $3.6 billion in subprime losses and Societe Generale’s charges aggregate $4.3 billion.

Switzerland’s Credit Suisse said its subprime losses total $4.2 billion; Swiss Re has taken $1.1 billion in writedowns; and UBS’s charges add up to $13.7 billion, the report said.

Advisen said that in Germany, Deutsche Bank has announced $3.2 billion in subprime losses; HSH Nordbank reported $2.6 billion in charges; IKB Deutsche said its losses were $11.9 billion; and LBBW has seen writedowns of $1.6 billion.

In the Netherlands, NIBC has reported $1.9 billion in subprime charges, according to Advisen.

Federal Reserve Chairman Ben Bernanke testified on Thursday that losses in the U.S. subprime mortgage market may have reached $100 billion so far and “certainly could be several multiples of that ,” Reuters reported. But he noted subprime losses would not top $500 billion.

The Japan Research Institute has released a report projecting potential international losses from U.S. mortgage woes could reach $464 billion and not subside to later this year, Dow Jones Newswires reported.

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: mtgsam@aol.com