Analyst sees more Q4 subprime write-downs

NEW YORK (Reuters) - Major Wall Street banks and brokerages, struggling under the weight of large subprime mortgage holdings whose value has plunged steeply, may take additional write-downs of between $30 billion and $40 billion in the fourth quarter, a top analyst predicted on Monday.

"Everybody will have write-downs in the fourth quarter," Charles Peabody, partner at New York-based research firm Portales Partners LLC, said at the Reuters Finance Summit in New York.

Citigroup Inc (C.N), the largest U.S. bank by assets, has said it expects to write down between $8 billion and $11 billion for subprime mortgages, and cut its previously reported third-quarter profit due to worsening credit market problems.

Citigroup's write-downs mostly relate to its $43 billion of collateralized debt obligations, or CDOs, whose value is tied to subprime mortgages.

Peabody said he expects more write-downs from Citigroup. He also said there may be write-downs at Goldman Sachs Group Inc (GS.N), which posted a 79 percent increase in third-quarter profit in September.

He said banks like Goldman and Lehman Brothers Holdings Inc LEH.N may not have hedged their mortgage exposure sufficiently to avoid write-downs.

"When Lehman reported third quarter, we said it's a quarter not to be believed," Peabody said. "I really don't believe those two organizations have come clean."

Merrill Lynch & Co Inc MER.N was the only big Wall Street firm to post a third-quarter loss after writing down $8.4 billion on investments linked to subprime mortgages that turned sour.

Goldman, Bear Stearns Cos Inc BSC.N, Morgan Stanley (MS.N) and Lehman have collectively written down $3.6 billion so far.

(Reporting by Anupreeta Das, editing by Braden Reddall)