(Corrects dateline to June 27) (Adds analysts' comments, background and share price)
June 27 (Reuters) - Merrill Lynch & Co MER.N will likely incur $5.4 billion of write-downs in the second quarter, mainly from its exposure to monolines, said an analyst at Lehman Brothers, who also saw higher quarterly losses at the world's largest brokerage.
Analyst Roger Freeman raised his write-down view by $3 billion for Merrill, making his estimate the highest among Wall Street analysts. Analysts have till date expected write-downs to range from $3.5 billion to $4.2 billion.
"We did a deeper review of Merrill's monoline exposures on non-ABS CDO (asset-backed security and collateralized debt obligation) assets... this incremental $1.7 billion of writedowns constitutes the majority of our adjustment," Freeman said.
In addition to the monoline write-down, the analyst said he was now incorporating a larger CDO/subprime write-down following a sharp decline in the ABX index over the past few days. ABX, a synthetic index of home equity asset-backed securities tied to credit default swaps, is comprised of risky home loans.
Freeman widened his second-quarter loss estimate to $2.78 a share from 64 cents. For 2008, he sees higher losses of $2.99 a share, from his prior view of a loss of 53 cents.
The analyst cut his price target to $44 from $47, and rates the stock "equal weight."
Shares of Merrill closed at $33.05 Thursday on the New York Stock Exchange. Through Thursday, they have plunged 38 percent this year. (Reporting by Tenzin Pema in Bangalore; Editing by Jarshad Kakkrakandy)