Overseas Subprime Loan Losses Large but Unclear

The status of overseas subprime loan losses is unclear, but it will be large. Several banks have declared multi-billion-dollar writeoffs. The stock prices of Barclays and the Royal Bank of Scotland, which had fallen sharply on rumors that they will have to take large subprime losses (Sanford Bernstein projected last week that the two banks would have to write off $4.4 billion of such losses), recovered somewhat today as Barclays denied that it subprime loan losses were so serious. But investor confidence in both Barclays and the RBS, which earlier were fighting over control over ABN Amro Holding NV (RBS's team won), remains weak, with their price-earnings multiples in the range of 6 to 7 whereas the average for European banking institutions is 10.