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First Quarter Losses expected at UBS and Merrils |
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NEW YORK, March 27 (Reuters) - Merrill Lynch & Co and UBS AG may lose money this quarter and suffer respective write-downs of $6.03 billion and $11.06 billion as credit problems worsen, according to Oppenheimer & Co analyst Meredith Whitney.
Whitney issued her forecasts late Wednesday, a day after cutting estimates for Citigroup Inc, Bank of America Corp, JPMorgan Chase & Co and Wachovia Corp, the largest U.S. banks. She said Citigroup's first-quarter write-down could total $13.12 billion.The earlier cuts fanned fears that credit and housing crises would weigh further on a banking industry that has already written off more than $160 billion, and depress earnings well into 2008 or beyond. Major U.S. financial sector indexes fell 3.5 percent to 4 percent on Wednesday. Whitney now expects Merrill to lose $3 per share in the first quarter, and tripled her projected write-down from $2 billion. She had previously forecast a profit of 45 cents per share. The analyst also cut her 2008 profit-per-share forecast to 20 cents from $4.According to Reuters Estimates, analysts on average expect profit per share of 17 cents and $3.82 for the respective periods. Whitney wrote that Merrill faces write-downs of $1.84 billion on collateralized debt obligations, $1.17 billion on below-prime "Alt-A" home loans, $950 million on leveraged loans to fund buyouts, $571 million on commercial mortgages and real estate, and $1.5 billion of other write-downs. The analyst also wrote that it was unclear whether Merrill Chief Executive John Thain would try to raise more capital, perhaps through hybrid securities, after having raised $12.8 billion since December. She also said Merrill faces a "highly disruptive year" of reorganization and downsizing, coinciding with subdued activity in fixed-income capital markets. UBS, meanwhile, may suffer a first-quarter loss of $2.75 per share, Whitney wrote. She previously forecast a 72 cents per share profit. The analyst cut her 2008 profit per share forecast to 45 cents from $3.70.Whitney wrote that UBS faces write-downs of $6.86 billion on CDOs, $3.19 billion on Alt-A loans, $650 million on leveraged loans, and $355 million on commercial real estate. UBS has been the European bank hit hardest by the U.S. sub-prime mortgage crisis. It has reported about $18 billion of sub-prime related losses, and estimated about $80 billion of remaining exposure to other investments that some analysts and investors consider risky.Whitney gives both banks' shares an "underperform" rating. She said Merrill trades at 1.5 times fourth-quarter book value and UBS at 1.6 times, levels she considers "relatively rich". In October, Whitney correctly predicted that Citigroup would cut its dividend and raise $30 billion of capital.
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