ANALYSTS' VIEW: Reaction to Lehman, Merrill

(Reuters) - Lehman Brothers Holdings filed for bankruptcy protection on Monday while Bank of America said it would buy Merrill Lynch & Co, as the worsening credit crisis further rocked the U.S. financial sector.

Meanwhile, the U.S. Federal Reserve and major banks announced steps to mitigate market volatility.

ANALYSTS' COMMENTS

MEREDITH WHITNEY, ANALYST, OPPENHEIMER & CO

"We expect the financial markets to be under unprecedented strain over the next several days as players respond to outsized industry deleveraging....

"Due to the liquidation of an unprecedented scale, we expect a broad-based decline in marks on asset values within the financial markets....

"We also expect the liquidation by Lehman's counterparties and asset sales to be swift....

"While we view this clearly as a long-term positive for Bank of America, the stock will likely not respond accordingly as investors near-term will focus on greater systemic risk, and BAC's sizable consumer loan exposure will overshadow any long-term positives in the deal, in our opinion."

DAVID TRONE, ANALYST, FOX-PITT KELTON

"Upon cyclical normalization, we believe surviving competitors will benefit from the demise of both Lehman and Bear Stearns, whose revenue will be reaped by other market participants....

"We believe Goldman Sachs stands to be the biggest beneficiary, with an estimated cross-cycle revenue lift of 5.5 percent....

"The failure of Lehman creates a significant amount of near-term uncertainty -- another financial institution could well emerge as having major exposure to Lehman."

SAM STOVALL, CHIEF INVESTMENT STRATEGIST, S&P EQUITY

RESEARCH

"From a sector standpoint, unfortunately, it's unclear as to whether we are more than halfway to the bottom of this financials free-fall."

JEFF HARTE, MANAGING DIRECTOR, SANDLER O'NEILL