Banks' Toxic Debts Could Hit $4 Trillion: Report

By: Reuters and CNBC.com | 07 Apr 2009 | 03:58 AM ET
Toxic debts racked up by banks and insurers could spiral to $4 trillion, new forecasts from the International Monetary Fund are set to suggest, British daily The Times reported on its website without citing sources.The IMF said in January that it expected the deterioration in U.S.-originated assets to reach $2.2 trillion by the end of next year.But it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21, the newspaper reported.In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia, the Times said.

Financial Woes
Bank stocks came under pressure on Monday after Michael Mayo, a former Deutsche Bank analyst who now works for CLSA's Calyon Securities, highlighted the risks in the sector in a research note.Mayo, who is widely respected for his timely calls in the sector, remains negative on the sector and is starting coverage at Calyon with "sell" or "underperform" ratings on 11 traditional U.S. bank stocks. His earnings forecasts for the sector also are below the average estimates of other Wall Street analysts.Mayo expects the recession to persist and to put further pressure on commercial real estate loans.