Global Banks May See Their Balance Sheet Shrink by $2 Trillion in 2009

The largest 15 global banks are expected to further shrink their balance sheet by about $2 trillion in 2009 and longer-term return on equity (ROEs) will remain subdued for the next two years, Morgan Stanley and Oliver Wyman said in a joint report.

The balance sheet shrinkage will continue to have a huge impact on liquidity and provision of capital…

A rebound in profit before provisions and markdowns is expected in 2009 and will be led by rates, foreign exchange, flow credit and commodities, even though the industry was likely to see “material” writedowns, the analysts said.

The report predicts the revenue pool shifting back to United States in the near term helped by localization trends. [via Reuters]

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