Merrill Lynch warned in a report today that investors are still underestimating the magnitude of the global credit crisis, which will likely result in massive consolidation among weakened financial firms.
“The credit crisis is broad, deep and global, and it is not likely to end soon,” Richard Bernstein, Merrill Lynch’s chief investment strategist in New York, said in a report.
“Investors are significantly underestimating both the scope and the depth of the credit bubble and its subsequent deflation. The problems are certainly not limited to large U.S. institutions that are overexposed to U.S. subprime. The effects are global and far-reaching,” he added.
Saying mortgage-related write-downs are reaching $500 billion globally, Mr. Bernstein warned, “The financial sector’s problems appear to be far from over. … We continue to believe that the global financial sector is heading for a massive consolidation.”
