BofA sees $3.5 billion writedown at Merrill, $7 billion at UBS

A man walks into the Merrill Lynch headquarters in New York, January 30, 2008.

(Reuters) - Banc of America Securities expects Merrill Lynch & Co Inc MER.N and UBS AG (UBSN.VX) to write down $3.5 billion and $7 billion respectively in the second quarter and forecast a quarterly loss for the investment banks.

Analyst Michael Hecht expects continued markdowns on troubled asset inventories, tough comparisons and weakness in a number of sales and trading areas for the second quarter.

Hecht forecast a quarterly loss of $1 a share for Merrill, compared with his earlier view of a profit of 21 cents a share, saying the marks on its collateralized debt obligations and mortgage-related exposures would be more severe than prior expectations.

Hecht also changed his second-quarter estimate for UBS to a loss of $1.70 a share from a profit of 31 cents, saying the company's U.S. sub-prime exposure had overshadowed the firm's other segments including wealth management, investment banking and asset management.

Slowing economic growth and still-large balance sheet exposure to residential and commercial mortgages suggest a lackluster, low visibility environment for the large investment banks through 2008, Hecht said.

(Reporting by Supantha Mukherjee in Bangalore; Editing by Vinu Pilakkott)