$34B more in write-downs for Citibank, Chase and Merrill

Citigroup Inc., JPMorgan Chase & Co. and Merrill Lynch & Co. may write down an additional $34 billion in securities linked to the collapse of the subprime mortgage market, according to Goldman Sachs Group Inc.Citigroup, the biggest U.S. bank, may reduce the value of its holdings by $18.7 billion in the fourth quarter and cut its dividend 40 percent, Goldman analyst William Tanona said in a Dec. 26 report on the New York-based companies. JPMorgan Chase & Co., the third-largest U.S. bank, may write off $3.4 billion, double Goldman's previous estimate. Merrill Lynch & Co. may reduce its holdings by $11.5 billion, he wrote.Losses and write-downs at the world's biggest banks and securities firms total $97 billion this year, according to data compiled by Bloomberg. The market for collateralized debt obligations, loans packaged into new securities, has dried up after surging subprime mortgage defaults led to rating downgrades and convinced many investors to buy only the safest debt.
"It will be a couple of quarters before the current credit crisis is fully digested by the markets," wrote Tanona, who has a "sell" rating on Citigroup's stock and a "neutral" rating on JPMorgan and Merrill.Meanwhile, Merrill Lynch plans to announce about 1,600 layoffs after disclosing fourth-quarter write-downs, CNBC reported yesterday.The layoffs are likely to be in trading positions and related areas and will not likely include the investment banking or private client groups, the cable channel said.Merrill Lynch had about 64,000 employees at the end of September, so 1,600 layoffs would represent less than 3 percent of its workforce.A spokeswoman for Merrill Lynch was not immediately available for comment.Shares of Citigroup, which has fallen 47 percent this year, dropped 89 cents to $29.56 yesterday. JPMorgan, down 9.7 percent this year, fell $1.30 to $43.64. Merrill Lynch declined $1.34, or 2.5 percent, to $53.20.Citigroup is trying to preserve capital after reporting a 57 percent drop in earnings for the third quarter and forecasting as much as $11 billion in losses and write-downs in the fourth quarter. The New York-based bank, which pays a 54-cent dividend, will have to raise $6.2 billion to meet its capital needs, according to Tanona.

Source - Combined wire services
December 28, 2007 Copyright © 2007, Newsday Inc.
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