Major banks on both sides of the Atlantic are braced for more heavy losses this year because of their exposure to the deepening subprime and credit crisis.

In the UK banks including Barclays, Royal Bank of Scotland and HSBC are facing "major trading losses".

In the US, large major banks and brokerages will suffer additional writedowns of more than $10 billion in the fourth quarter as deteriorating credit trends continue to undercut the value of subprime mortgages and related securities

Analysts at Goldman Sachs predicted today that profits at Barclays Capital, the UK bank's debt focused investment bank, will tumble 40 per cent year-on-year to just £583 million in the second half.

BACKGROUND

• Elephant slumps in wake of crunch

• Heads on the block, investors call for change

• Credit crunch forces Delek to leave property deal

• US rate cut looks certain after new data

• Bank of America to axe 3,000 after 'our errors'

BACKGROUND

• More pain for private equity industry

• Russian state bank poised to boost liquidity

• House prices‘to stay flat for years’

• Will soaring oil pump up inflation?

• US bank slump goes on

Black clouds loom on horizon

For the first time in 15 years, I am seriously worried about the outlook for the economy, the housing market and sterling

Float on the job market

Don't believe the scary headlines. It's not the worst time to consider a career in banking

Related Links

• Meredith Whitney: The $360bn analyst

• Global Shares dive on oil and credit jitters

• Banks driven lower by Citigroup warning

The Goldman team argued that revenues and profits at BarCap, which is a big player in the structured credit markets and is seen as heavily exposed to a downturn, face an "uncertain outlook".

In New York, Deutsche analyst Mike Mayo said the bulk of the write-downs will happen at Citigroup and Merrill Lynch.

He estimates each company will have about $4 billion in writedowns in the current quarter, mainly because of their exposure to subprime mortgages and collateralized debt obligations.

Merrill shocked markets last week when it wrote-down $8.4 billion in the third quarter and still needs to work through more $20 billion in exposure to subprime loans and CDOs. The bank's chief executive Stan O'Neal has now been ousted.

Mr Mayo said banks will need to bolster their balance sheets because reserves to loans (1.2 per cent) are the lowest since 1983. But as banks bring capital ratios back to historical levels that could shave 20 per cent off profits.

Meanwhile in London, Sandy Chen at Panmure Gordon said there was a "clear path that leads from the current turmoil in credit markets to major trading losses for the UK bank with US mortgage and global markets exposure".

Mr Chen, who has already cut his profits forecasts and price targets for every UK bank he covers, cited HSBC, Barclays and RBS as having direct exposure to mortgage-related businesses in the US.

He said UK banks with indirect exposure through structured products such as credit derivatives, could also be hit.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive