Pain for banks to last into 2008: Morgan Stanley

By Clara Ferreira-Marques

LONDON (Reuters) - European banks face several more months of pain until they give additional details on the impact of the credit crisis along with full-year results next year, the head of European banks research at Morgan Stanley said.

"The fact that some banks probably won't know their full (mark-to-market losses), or even disclose their full (losses) until their full-year results, which don't come until February, means this could be quite painful," Huw van Steenis said at the Reuters Finance Summit in London on Tuesday.

"Almost every finance director I have spoken to across Europe assumes the interbank market will remain constricted until probably February next year, because that's the point at which you find out who's got what on their books."

Europe's lenders have been battered in the recent equity market sell-off, hit by "mark-to-market" losses and writedowns at U.S. group Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) and Citigroup (C.N: Quote, Profile, Research, Stock Buzz).

In the UK, Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) and Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), the number two and three players, have lost roughly a quarter of their value since the end of July, with the combined market value of the sector down 25 billion pounds ($52.2 billion) since August.

CREDIBILITY HIT

In the UK particularly, pressure for greater disclosure is growing. Credit Suisse analysts called for more information from the banks in a note earlier this week, saying the fact there have been no profit warnings from the sector provided little comfort.

Morgan Stanley's van Steenis agreed the market would err on the side of caution until the situation was clearer. "It really has to come from disclosure," he said. "People want to know what's behind, what's on the books."  Continued...