(Corrects to show that Merrill Lynch is a brokerage in lead)
March 27 (Reuters) - Sanford C. Bernstein expects Merrill Lynch & Co MER.N to post a loss in the first quarter instead of its previous forecast for a profit, citing $4.5 billion in total writedowns at the U.S. brokerage.
Merrill Lynch will report the weakest first quarter results among the major domestic securities firms, analyst Brad Hintz said in a research note to clients.
“With $30.4 billion of collateralized debt obligations (CDOs) still on Merrill’s balance sheet at the end of 2007, we believe the ‘CDO Overhang’ will be an ongoing concern for the firm over the next twenty-four months,” Hintz said.
However, the biggest swing factor for Merrill’s first quarter results will be the severity of the writedowns of it’s CDO assets and the related increase to the valuation reserve the company takes, he added.
The firm will likely need to take further valuation reserves for its financial guarantor counterparty exposures, Hintz said.
He expects Merrill to report a loss of $1.60 per share instead of an earlier view of earnings of $1.30 per share.
The brokerage maintained its “market-perform” rating on the stock, but cut its price target by $3 to $50.
Shares of the company were down 1 percent at $43.97 in early trade on the New York Stock Exchange. (Reporting by Sweta Singh; Editing by Bernard Orr)