John At The Center

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 will remain subdued for the next two years, Reuters said, citing a joint report from Morgan Stanley and Oliver Wyman.

The balance sheet shrinkage will continue to have a huge impact on liquidity and provision of capital, hence it is critical confidence is restored soon, in particular to help real money investors buy credit assets, the analysts from both the firms wrote in a note to clients.

via Banks May Shrink Balance Sheets By $2 Trillion More – DealBook Blog – NYTimes.com.