July 2 (Reuters) - Merrill Lynch & Co Inc MER.N may incur $5.8 billion of write-downs in the second quarter, said Oppenheimer analyst Meredith Whitney, who also forecast a loss for the world’s largest brokerage for the period.
Whitney’s estimate is the highest yet among Wall Street analysts, who till date expected write-downs to range from $3.5 billion to $5.4 billion.
She also expects Merrill to announce some sort of capital raising plan along with the quarterly earnings.
“Our best guess is that MER will elect to monetize both BlackRock Inc (BLK.N) and Bloomberg prior to the second-quarter earnings release.”
Merrill’s 49 percent stake in BlackRock is worth roughly $10.2 billion based on BlackRock’s market value as of June 30 and it may not be enough to solely generate the desired capital, estimated to be more than $5 billion, Whitney said.
One of the major problems facing financial institutions, including Merrill, is that new equity raised is merely going toward plugging holes in company capital structures and not toward funding new growth opportunities, she said.
“So after MER reports what we believe will be a loss for the second quarter and a capital raise, it will merely be where it began the second quarter with a book value in the mid-$20s,” she added.
Whitney, who maintained her “underperform” rating on the stock, expects Merrill to post a second-quarter loss of $4.21 a share, compared with her prior profit view of 20 cents a share.
She widened her 2008 loss estimate for Merrill to $5.37 a share from 45 cents a share.
Shares of Merrill were trading down 1 percent at $31.93 in morning trade on the New York Stock Exchange Wednesday. Through Tuesday, they have plunged 40 percent this year. (Reporting by Neha Singh in Bangalore; Editing by Vinu Pilakkott)