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European banks face a "considerably more challenging year" in 2008; and credit-market turmoil, which triggered about $76bn in writedowns at securities firms, will last through the first quarter, ratings agency Fitch said.
"It isn't inconceivable that other banks will also reveal more writedowns" on credit-related assets and earnings will come under increasing pressure, Fitch Ratings said after a special report on European banks in 2008.
"If the current liquidity squeeze should develop into a fully blown credit crunch, this could have a severe impact on the real economy, which in turn would have significant ramifications for banks, including a sharp slowdown in credit growth," said Alison Le Bras, Fitch's managing director in the financial institutions group.
Fitch doesn't rule out "further negative rating actions" to European banks should current "highly illiquid and volatile market conditions" persist, it also said. "Revenues are going to be tougher, not only in the capital markets area, but also in
Scott added that UK-focused banks would be squeezed by increased funding costs. "A slowdown in the British housing market as well in capital markets, two former drivers of growth for
By Ben Livesey