UPDATE 3-Analyst sees $8 bln Citi writeoff after Merrill move

martes 29 de julio de 2008 18:43 CEST

(Adds analysts' comments, updates share price)

By Tenzin Pema

BANGALORE, July 29 (Reuters) - Citigroup Inc (C.N: Cotización) may write down about $8 billion in the third quarter from its exposure to collateralized debt obligations (CDOs) after Merrill Lynch & Co MER.N agreed to sell its CDOs at a sharp discount, Deutsche Bank analyst Mike Mayo said.

The analyst also forecast a third-quarter loss and widened his 2008 loss estimate for Citigroup, the largest U.S. bank by assets.

On Monday, Merrill Lynch agreed to sell $30.6 billion of CDOs, a kind of repackaged debt, to an affiliate of private equity fund Lone Star Funds for just $6.7 billion, or about 22 cents on the dollar.

"We do think the CDO sale is large and diversified enough to be applicable to others with similar exposure and that the monoline settlements will pave the way for similar enough transactions," analysts at UBS said.

They said Citigroup has the largest exposure to both CDOs and monoline bond insurers, and that investors could expect further incremental write-downs in coming quarters.

On Monday, Merrill also said it would take a $5.7 billion third-quarter write-down as it unloads huge amounts of risky debt, and would raise $8.5 billion by selling new stock.

Citigroup has $22.5 billion of net CDO exposure, and based on Merrill's write-downs the New York-based bank could have another $7 billion of write-downs, Deutsche Bank's Mayo said.   Continuación...