Reply #52: Analysts see Q2 loss for Merrill, more writedowns

[UpInArms]

http://www.reuters.com/article/bondsNews/idUSBNG7192420080626?sp=true

(Reuters) - Wall Street analysts forecast a second-quarter loss for Merrill Lynch & Co (MER.N: Quote, Profile, Research, Stock Buzz), and said the world's largest brokerage will likely incur total writedowns in the range of $3.5 billion to $4.2 billion.

Shares of Merrill were down 3.4 percent to $34.24 before the bell Thursday, after analysts at Goldman Sachs and Sanford C. Bernstein said they expect Merrill to post its fourth straight quarterly loss from its exposure to collateralized debt obligations (CDOs) and hedges.

"Yet again, the biggest swing factor for Merrill's upcoming second-quarter results will be the severity of the writedowns related to Merrill's CDO and mortgage-related exposures," Bernstein analyst Brad Hintz wrote in a note to clients.

In addition, the level of valuation reserves Merrill takes against its CDO and mortgage-backed securities hedges will also play a large role in the ultimate size of earnings losses the firm reports, Hintz said.

Hintz forecast a second-quarter loss of 93 cents a share compared with a prior profit per share view of 82 cents. He also expects the company to post a loss of $1.07 a share in 2008. He earlier saw a profit of 56 cents a share for 2008.

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Tanona estimates Merrill will incur writedowns of $4.2 billion, while Bernstein's Hintz expects the company to take $3.5 billion in writedowns for the second quarter.

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