(Recasts; adds details, background)
June 9 (Reuters) - Oppenheimer analyst Meredith Whitney expects Citigroup Inc (C.N), Merrill Lynch & Co Inc MER.N and UBS AG’s UBSN.VX collateral damage against their monoline exposures to be in excess of an additional $10 billion.
The three companies have to date taken in about $10 billion in write-downs against their monoline exposures, Whitney said.
Over the last few years, banks have made significant profits by packaging mortgages, credit cards, home equity loans and other credit instruments into pools of debt, backed by a guarantee.
Highly rated bond insurers, such as Ambac Financial Group Inc ABK.N and MBIA Inc (MBI.N), were responsible for writing these guarantees.
But the credit crunch has put pressure on the ability of these firms, also known as monolines, to insure against credit losses and, as their insurance started to lose value, the banks found they were unable to sell these pools of securities and halted the business.
On June 5, Standard & Poor’s stripped the bond insurance units of MBIA and Ambac of their top ratings, formally ending their “AAA”-guaranty business.
As of the first quarter, UBS has the largest monoline exposure of $6.3 billion followed by Citigroup at $4.8 billion and Merrill at $3 billion, Whitney said. (Reporting by Supantha Mukherjee in Bangalore; Editing by Deepak Kannan)