UPDATE 2-GS sees Q1 losses for Citi, Merrill on write-downs

martes 1 de abril de 2008 17:50 CEST
 

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By Sweta Singh

BANGALORE, April 1 (Reuters) - Goldman Sachs said it sees significant losses for Citigroup Inc (C.N: Cotización) and Merrill Lynch & Co Inc MER.N in the first quarter as it expects sizable write-downs for both investment banks amid deteriorating credit and equity markets.

"If our forecasts are correct, it is likely that these firms may need to raise additional capital in coming months via equity offerings, asset sales and/or dividend cuts," analyst William Tanona wrote in a note to clients.

Investment banks in the United States continue to be under pressure as they grapple with exposure to high-risk securities and bad debts in a slowing economy.

The global financial sector is seeking to raise additional capital after having sustained more than $200 billion of losses from subprime mortgages and other assets.

For the third consecutive quarter, Tanona is expecting write-downs on asset backed securities (ABS) and collateralized debt obligations (CDOs) to be the "driving force" behind quarterly losses for both Citigroup and Merrill.

The analyst sees about $12 billion of ABS CDO related write-downs for Citigroup, and expects Merrill to take an additional $2.5 billion credit value adjustment on its credit default swaps (CDS) on CDOs for the first quarter.

He said additional write-downs within sub-prime residential mortgage backed securities, Alt-A, and prime, will impact J.P. Morgan Chase & Co (JPM.N: Cotización), but added that it was difficult to gauge the impact at this point.   Continuación...