Tullett: Crisis will continue until 2011

Terry Smith, the chief executive of Tullett Prebon, has predicted that the current financial turmoil has at least three more years to run.

Mr Smith said he had worked through three previous banking crises that had all taken two to three years to play out and that the current troubles were far worse. "The amount of damage done to the credit system is worse than in any of those periods," he said. "2011 is the first time I can see an end to it from here."

After the big write-downs on structured credit products, the banks "won't be able to lend money to normally credit-worthy companies. We will have a normal bad debt cycle", he added.

Mr Smith said the market turmoil was good news for Tullett Prebon. The inter-dealer broker increased first-half operating profit by 30 per cent to £84.2m as clients sought to protect themselves against market volatility in equities, interest rates and currencies.

He said that the current growth rate would not be sustainable and that growth should return to a trend of 10-12 per cent, probably in the second half of the year.

The biggest threat to Tullett's growth is "an outbreak of economic stability" but "I would suggest the odds are highly stacked against that", Mr Smith said.

But volatility could cause Tullett problems in its proposed merger with its US rival GFI. Mr Smith said that with markets so unpredictable, the companies' share prices could diverge in the four to six weeks needed before an agreement, threatening the deal.