Shares in AIG slumped 31 per cent as traders panicked about the future of the world’s largest insurer. The group said that it had hired JPMorgan Chase to help it to raise new capital and it is expected to reveal asset sales on Monday to bolster its balance sheet.
At the same time, Washington Mutual stock slipped 3.5 per cent to $2.73 as the bank’s new chief executive sought ways of steering the largest American savings and loan group through its crisis after it projected a new writedown and was downgraded to junk status by Moody’s, the credit rating agency.
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Although John Varley, the chief executive of Barclays, and Bob Diamond, the chief executive of the investment banking division, have stated that they do not favour large-scale mergers, the prospect of securing Lehman businesses on favourable terms has piqued their interest. A number of other parties are also interested, including a consortium of Bank of America, JC Flowers, the private equity group, and China Investment Corporation, the sovereign wealth fund.