The credit crunch will wipe a combined £6.5 billion off the annual profits of Barclays and Royal Bank of Scotland, according to a respected banks analyst.

Anthony Broadbent at Sanford Bernstein predicted that it was realistic to expect that full-year profits at Barclays would come in £3 billion lower, and that profits would fall by £3.5 billion at RBS.

Last year, Barclays made pre-tax profits of £7.1 billion, against RBS's £9.186 billion.

Mr Broadbent said in a worst-case scenario, profits at Barclays could fall by as much as £11.9 billion and at RBS by a staggering £15.8 billion thanks to the two banks' exposure to structured credit and the subprime mortgage market.

He said if that happened it would be "significant" but not "terminal" for either bank.

Mr Broadbent said: "While we see this as an extreme case which is highly unlikely to materialise, we have quantified its impact on both Barclays and RBS,"

Barclays and RBS, at the centre of intense loan-loss speculation since late last week, would join rivals in the US and Europe in declaring heavy credit-related hits.

Merrill Lynch and Citigroup have both parted with their chief executives after together writing off $11.9 billion and warning investors that more pain may have to come.

Overnight Morgan Stanley was under pressure after analysts at Deutsche Bank and Fox, Pitt Kelton predicted fourth-quarter writedowns of between $3 billion and $6 billion.

The French bank SG suffered a 40 per cent slide in its third-quarter profits from investment banking today after taking a €230 million writedown on its maximum exposure to sub-prime mortgage related debt.

BNP Paribas, one of the first to highlight its exposure, reports tomorrow.

Mr Broadbent said that it would also be realistic to assume that profits at Barclays will write down about £1.6 billion of its holdings in structured investment vehicles (SIVs) and other highly geared products.

He reckons RBS will write off £500 million of its credit exposure.

The Bernstein analyst's note joins bearish research in recent days from Goldman Sachs and Panmure Gordon. It countered an optimistic note from Dresdner Kleinwort yesterday that claimed potential losses had been overplayed.

James Invine, an analyst at the German bank, upgraded Barclays shares to a "hold" stating that the risks of "catastrophe" problems at the UK's third largest bank are very low and the stock is undervalued.

Shares in Barclays and RBS continued their downward spiral today as speculation that major losses were looming refused to go away.

In heavy trading volumes, Barclays was more than 2.5 per cent down at 510.5p; RBS fell 3.5 per cent to 439.25p.

Barclays declined to comment beyond a mid-October trading update in which it said trading would continue to be profitable for the remainder of the year.

Bob Diamond, the bank's president, stated publicly at the height of the speculation that Barclays' potential losses should be limited to £75 million.

RBS declined to comment.

It is scheduled to provide a trading update on December 6.

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