Capital DestroyersCapital Destroyers
Wall Street’s financial powerhouses have made billions of dollars vanish over the past year.
August 1, 2008
Nate Wendler
And they're supposed to be the smart money? This chart depicts the write-downs and reserves taken by financial firms, and shows the shocking destruction of capital, as measured by book value and earnings. Merrill Lynch fared, by far, the worst, with charges equal to 86 percent of its book value. In other terms, they wiped out 18 quarters, or 4.5 years, of earnings. Citigroup was next, evaporating the equivalent of six quarters of earnings with is own write-downs. And these figures do not even include the outright losses reported since the third quarter of 2007. There could be a lot more to come.
DISAPPEARING ACT
Wall Street's financial powerhouses have made billions vanish.
| Company | Merrill Lynch | Citigroup | Bank of America | Wachovia | UBS |
|---|---|---|---|---|---|
| Ticker | MER* | C | BAC | WB | UBS |
| Asset Markdowns Q3'07-Q1'08 ($B) | $30.5 | $38.6 | $8.3 | $5.0 | N/A |
| Shares Outstanding (m) | 985 | 5,591 | 4,461 | 1,977 | 2,732 |
| Markdowns per share | $30.96 | $6.90 | $1.86 | $2.53 | N/A |
| Markdown plus Reserves Q3'07-Q1'08 ($B) | $37.0 | $42.9 | $14.8 | $7.0 | $38.2 |
| Mark/Share | $37.56 | $7.67 | $3.32 | $3.54 | $13.98 |
| Book Value After Debacle (Q1'08) | $25.93 | $20.73 | $31.22 | $36.24 | $8.31 (Swiss Francs) |
| Book Value Before Debacle (Q2'07) | $43.55 | $25.56 | $29.95 | $36.40 | 26.51 (Swiss Francs) |
| Charges as a % of book value (Q2'07) | 86% | 30% | 11% | 10% | 52% |
| Charges equivalent to number of quarterly profits erased | 18 | 6 | 2 | 2 | 3 |
| Total write-offs through Q1 of all five firms: $139.9 billion | |||||
| *Pro Forma | |||||
| Please note: Investment firms “mark to market” their holdings while banks take reserves against anticipated losses, so the numbers are not identical. source: Company Reports, SNL Bloomberg, Portales Partners | |||||
