Global Banking Crisis In The Making

In the past, i would never have believed the possibility of Citibank encountering severe financial crisis let alone on the brink of bankruptcy. That is until recently, after the startling US financial bailouts in 2008....

Another global bank, London-based HSBC Holdings Plc, Europe’s largest bank by market value, announced that it may have to raise as much as $30 billion and cut the dividend in half as earnings drop!

One of the better performer in the banking sector last year, HSBC’s profit is likely to fall sharply this year and recovery is expected at the earliest 2011.

According to Morgan Stanley, HSBC has one of the weaker capital ratios in Europe and the second weakest in Asia.

In addition, HSBC will have to make greater provisions in 2009 because 75% of its loans are in the U.S. and U.K.

The worst financial crisis since the Great Depression is hurting banks worldwide. Deutsche Bank AG, Germany’s biggest banks, reported a loss of about 4.8 billion euros as it increased provisions for bad debt. Citigroup is selling its best performer, Smith Barney brokerage to Morgan Stanley and may also dump the CitiFinancial consumer-lending unit, pointing to an imminent breakup of the once giant financial group.

Nothing seems impossible these days.....