EUROPEAN bank bosses are nervously awaiting shareholder reaction this week as they prepare to reveal the full extent of the damage caused by the credit market meltdown.

Three of Europe’s biggest investment banks are expected to reveal the full impact of the American sub-prime loan crisis that is now causing waves on this side of the Atlantic.

Deutsche Bank, UBS and Credit Suisse are all expected to announce big write-downs following the shock $7.9 billion (£3.8 billion) losses announced by Merrill Lynch last week.

The results come as Stan O’Neal, the chairman and chief executive of Merrill Lynch, fights to save his job after surprising Wall Street with record-breaking losses on sub-prime loans.

The bank’s board was this weekend discussing whether to axe O’Neal as a result of its disastrous exposure to toxic sub-prime mortgages and leveraged loans.

Although the three European banks have each released forecast figures, analysts fear in reality the write-downs will be far worse.

At the beginning of the month, Deutsche Bank said profits would be up, despite likely write-down charges of €2.2 billion (£1.5 billion) on leverage-loan commitments. UBS guided the market to expect write-downs closer to $4 billion, mostly from its fixed-income department. Credit Suisse is expected to have fared best, having had less exposure to collateralised debt obligations and sub-prime lending.

Last week, Deutsche Bank chief executive Josef Ackermann admitted the industry needed to improve its risk management, find better ways to value complex products, look at the role of credit-rating agencies and improve its transparency.

One analyst said: “Acker-mann’s comments have suggested that Deutsche Bank is preparing to ‘kitchen sink’ the results – that is, get all the bad news out all at once and then move on.”

UBS is still reeling from the $300m in sub-prime losses at its Dillon Read Capital Management hedge fund that sparked that unit’s closure and a management shake-up in the investment-banking division.

Analysts last week were predicting more shocks in the belief that banks didn’t have the tools to value their holdings.

A report last week by Gold-man Sachs analyst William Tanoma, entitled Waiting for the Next Shoe to Drop, warned that Merrill Lynch could write-down a further $4.5 billion in the next three months. Others predicted that Merrill would have to cut jobs severely on the back of the write-downs. Earlier this month, O’Neal assured staff that their jobs were secure.

Meanwhile, Bank of America is cutting 3,000 jobs, mainly from its investment bank.

Merrill’s losses were the biggest reported by a bank since the credit turmoil began, and BoA’s job cuts were the deepest so far on Wall Street, raising fears that there is more pain to come.

In America, there was speculation that Merrill could sell some of its major investments to shore up its finances, for instance its 20% stake in Bloomberg, the financial-media group, which is worth more than $5 billion.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax