Multi-billion dollar write-downs, quarterly losses in the tens of millions of billions of dollars instead of large profits that investors around the world and Wall Street are used to seeing, and boardroom tussles and resignations. Welcome to the aftermath of subprime.

After a summer and early autumn that seemed to show that some of Wall Street's biggest firms had survived the storm (keep in mind the Dow also set a record high as well), the flood waters are receding and the real damage is now showing. To use a midwestern analogy that is all too familiar for people in my flood prone home state of Ohio "the levy held and kept the main part of town safe, but now the water is going down and the damage is worse than we thought" (for added affect, try saying that in your best southern accent).

Earnings season seemed to be the revealing and deciding factor in all this subprime drama. After months of thinking we had made it through the unprecedented saga of subprime, everyone had to do a quick reality check when banks started reporting huge, multi-billion write-downs of bad loans, and major financial behemoths like Merrill Lynch were suddenly reporting enormous quarterly losses not seen in ages at the company.

Subprime also claimed its first boardroom casualty this week as Merrill Lynch CEO Stan O'Neal will retire, apparently under pressure after Merrill's abysmal earnings. It should be noted though that he will get about US$161.5 mln in retirement benefits though.

Even Singaporean lenders, for the most part untouched by the subprime saga -or so one thought- are feeling the heat. While not as severe as what its US counterparts are experiencing, the proof was in the pudding in the earnings announcements. UOB saw a nice 8.2% rise in its net profit for Q3, but it came in short of analysts' expectations thanks to...you guessed it! Subprime issues in the U.S.

So it doesn't seem we are out of the woods yet with subprime, and to use a rather morbid analogy, "the flood waters may be receding but the casualties are gonna surface."

Let's hope the damage is minimal...

Labels: Merrill Lynch, subprime, UOB