UPDATE 2-Citigroup faces Q2 loss, JPMorgan shr view cut-Merrill
By Tenzin Pema
BANGALORE, June 24 (Reuters) - Citigroup Inc (C.N: Cotización) will likely post a second-quarter loss and suffer a possible $8 billion of fresh write-downs, while credit concerns will also weigh on JPMorgan Chase & Co's (JPM.N: Cotización) quarterly results, according to Merrill Lynch & Co analyst Guy Moszkowski.
The analyst said recent comments from Citigroup management as well as falling home prices and rising subprime mortgage defaults suggest that "another round (of write-downs) is forthcoming."
Last week, Citigroup Chief Financial Officer Gary Crittenden said on a Deutsche Bank conference call that the bank could take substantial write-downs in the second quarter, raising concern that second-quarter earnings would be weaker than expected. Moszkowski also said write-downs will weigh on JPMorgan, and that the bank's shotgun acquisition of Bear Stearns Cos will likely result in increased markdowns.
The analyst also lowered his 2008 and 2009 earnings estimates for JPMorgan, and forecast a 2008 loss for Citigroup, saying he expects additional writedowns at both companies.
Financial institutions globally have written down more than $400 billion in assets amid the credit crunch.
Moszkowski expects Citigroup to post a second-quarter loss of 50 cents a share, after earlier expecting profit of 39 cents a share. He also projected a full-year loss of 42 cents a share, after earlier expecting profit of 44 cents a share.
The analyst expects Citigroup in the second quarter to incur $5.1 billion of writedowns on collateralized debt obligations and subprime exposure; to boost reserves related to monoline insurers by $2.4 billion, and to write-down exposure to "Alt-A" mortgages by $423 million. Continuación...