The proposed combination of Lloyds TSB and HBOS would create a bank facing �5.7bn (£4.5bn) of write-downs in the second half of this year, the worst in Europe, according to estimates from JPMorgan yesterday.

The proposed combination of Lloyds TSB and HBOS would create a bank facing 5.7bn (£4.5bn) of write-downs in the second half of this year, the worst in Europe, according to estimates from JPMorgan yesterday.

Analyst Kian Abouhossein estimates that European banks face an additional 28.4bn (£22.4bn) of write-downs before 2009 due to their exposure to assets hit by the credit crunch and falling property market.

"This would bring total write-downs to an estimated 116.1bn (£91.7bn), implying 24% of total write-downs remain," he wrote in a note to clients yesterday.

He also reckons that Barclays could incur write-downs of 3.7bn (£2.9bn) with Deutsche Bank, UBS and Societe Generale also facing the prospect of cutting the value of their investments.

He said the greatest risk of further write-downs lay in investments linked to US commercial mortgages and real estate, which have been hit by the implosion of investment bank Lehman, and in leveraged finance.

This would leave Lloyds TSB, Royal Bank of Scotland and Barclays among those banks at risk of not having a core tier one equity ratio of 6%, a measure of a bank's capital cushion, Abouhossein said.

He also highlighted Lloyds TSB, together with Belgium's Dexia and Bank of Ireland, as being exposed to problems accessing funding.

The takeover of HBOS by Lloyds TSB is expected to complete at the end of 2008 or early 2009. It requires the backing of 75% of HBOS shareholders and 50% of those at Lloyds TSB.