UPDATE 1-Merrill, UBS outlooks slashed by Oppenheimer
By Jonathan Stempel
NEW YORK, March 27 (Reuters) - Merrill Lynch & Co MER.N and UBS AG UBSN.VX may suffer respective first-quarter write-downs of $6.03 billion and $11.06 billion, according to Oppenheimer & Co analyst Meredith Whitney, who slashed her earnings forecasts for the banking giants as the credit crisis drags on.
Whitney issued her outlooks late Wednesday, a day after cutting estimates for Citigroup Inc (C.N: Cotización), Bank of America Corp (BAC.N: Cotización), JPMorgan Chase & Co (JPM.N: Cotización) and Wachovia Corp WB.N, the four largest U.S. commercial banks. She said Citigroup's first-quarter write-down could total $13.12 billion. [ID:nN26407454]
The earlier cuts fanned fears that credit and housing crises will crimp earnings at banks and brokerages for a longer period of time. Major U.S. financial sector indexes fell 3.5 percent to 4 percent on Wednesday, roughly four to five times larger than the declines in broader U.S. stock indexes.
Whitney now expects Merrill to lose $3.00 per share in the first quarter, after previously forecasting a profit of 45 cents per share. She also cut her 2008 profit-per-share forecast to 20 cents from $4.00.
According to Reuters Estimates, analysts on average expect profit per share of 17 cents and $3.82 for the respective periods.
The analyst 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.
Whitney also wrote that it is unclear whether Chief Executive John Thain will 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 fixed-income capital markets activity.
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. Continuación...