JPMorgan and BofA poised for total $3bn writedown

JPMorgan Chase and Bank of America (NYSE:BAC) are expected to reveal losses of about $3bn on holdings of mortgage securities and leveraged loans when they report third-quarter results this month.

This would take to more than $20bn the total writedowns announced by the world's leading banks as a result of the credit market turmoil over the summer.
JPMorgan is likely to unveil mark-to-market losses on leveraged loans of about $1.4bn, in line with those reported by Citigroup last week, according to Howard Mason, analyst at Sanford Bernstein. He estimates it will suffer a further $700m of writedowns on mortgages and mortgage-backed securities, for a total of $2.1bn.

For Bank of America, he estimates leveraged loan losses will be $700m and the mortgage writedowns $300m. Merrill Lynch last week said it had suffered $5bn losses. UBS said it had $3.7bn of writedowns, Deutsche Bank $3.1bn and Citigroup $2.7bn.
Other banks with smaller capital markets operations such as Wachovia are likely to report writedowns. Last week, Washington Mutual said it would take a hit of $410m on mortgages held for sale, holdings of mortgage-backed securities and losses in its trading business.
JPMorgan and Bank of America are big lenders to private equity firms and the bulk of their writedowns will come from leveraged loan commitments they had intended to syndicate but on which they would take a loss if they sold them now.

The two banks were not so active in collaterlised debt obligations composed of bundles of subprime mortgages. This was where Merrill said on Friday it would take a $4.5bn writedown because of the fall in value of the mortgages it had warehoused and the tranches of the CDOs it had retained.

The size of JPMorgan and Bank of America's writedowns will depend on the effectiveness of their hedging strategies, which has varied widely among the banks that have reported.
Stan O'Neal, Merrill chief executive, was disappointed at its risk management on CDOs whereas Goldman Sachs said its short positions on subprime mortgages had more than offset the fall in value of its holdings.
In its warning, Citigroup said it would increase its loan loss reserve more than $2bn in its consumer businesses. Mr Mason does not expect JPMorgan and Bank of America to have big increases. They have indicated that they are adequately reserved.

Tracking the Dow Movement on Monday 8/10/07









Healthy closing,above the MAV.
It's a bullish harami.The day ended with a four-legged doji!
http://www.litwick.com/indicators/1116.html






The closing on Monday was resilient,holding above the 5days weekly MAV,still in the positive territory.There's still life above the surface.