Leading bankers on Thursday moved to calm the global markets even as they admitted that the shockwaves from of the US subprime collapse could put private equity deals on hold for the next few months, The Financial Times reports.
Shares in European and US banks have slumped in the past week as investors have fretted about their exposure to subprime-related losses as well as leveraged loans stuck on their balance sheets. Analysts estimate large banks have underwritten loans worth $300 billion to finance deals not yet been completed.
Bob Diamond, Barclays president, on Thursday predicted the consequences of the subprime collapse could take more than a year to be resolved. However, he said the leveraged loan market should recover more quickly: “We would expect at some point over the next two to three months to see that market at more normal volume levels.”
Brady Dougan, chief executive of Credit Suisse, adds: “There has been a back-up in pricing and probably in August it will be a bit quieter. our hope is that the market will begin to operate more normally in the short term.”
However, institutions with direct exposure to the subprime market continue to suffer. Shares in IKB plunged by 40 per cent on Thursday following a government-led bail-out of the German lender, which warned this week of heavy losses in a fund it managed.