Late last week Citibank warned the markets that more big writedowns were expected in quarter 2. They are also looking at more credit losses in the face of what they called unprecedented conditions in the market.
Following the announcement shares on the NYSE fell by over 4 percent, recovering by the end of trading though still down 1 percent. The markets have already seen disappointing results from other major financial players, leading many to feel that the credit crunch is going to hurt companies for some time to come. Citibank made a lot of their money in the sub-prime lending market so have been hit hard by the meltdown in this area.
As well as the mortgage difficulties they experienced Citibank are now seeing the credit crunch hitting their credit card arm too, with business really slowing down as consumers feel the need to rein in their spending.
In order to try and balance their accounts Barclays are looking to raise in the region of GBP4 billion from external investors. This is to avoid using a rights issue which could seriously affect their share price.
Barclays Bank currently has one of the lowest capital reserves figures in the industry and will certainly face stiff criticism if this is not being seen to be addressed. Criticism tends to equal falling share prices and the bank do not want to see their position further weakened by such activity.
The bank has many facets to its business, with Barclays Insurance, stockbrokers and high street banking just a number of the best known. There is no question that they are operating well but in the current economic climate and with other financial institutions having suffered already it is important that Barclays can source this additional funding.
A recent study by the Alliance and Leicester has found that almost three quarters of UK adults are cutting back on spending as they deal with the rising costs of living in Great Britain.
The view of around 35 percent of those surveyed by Alliance and Leicester is that their disposable income is decreasing, and will continue to do so as they watch fuel, food and general household bills move ever upwards. Sacrifices are being made in clothes shopping, with nearly 40 percent of people saying they will be reducing their spending, followed by socialising, with around 36 percent of respondents cutting back.
An Alliance and Leicester spokesperson said that the majority of people are feeling things are getting harder now, adding that it is good to see the people of the UK being aware of the situation and doing something about it rather than ignoring what is happening.
