Merrill, UBS outlooks slashed by Oppenheimer

By Jonathan Stempel

NEW YORK (Reuters) - Merrill Lynch & Co (MER.N: Quote, Profile, Research) and UBS AG (UBSN.VX: Quote, Profile, Research) may lose money this quarter and suffer write-downs of $6 billion and $11.1 billion, respectively, as credit problems worsen, according to Oppenheimer & Co analyst Meredith Whitney.

The analyst issued her forecasts late Wednesday, after bank shares tumbled following her decision a day earlier to slash estimates for Citigroup Inc (C.N: Quote, Profile, Research), Bank of America Corp (BAC.N: Quote, Profile, Research), JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) and Wachovia Corp (WB.N: Quote, Profile, Research), the largest U.S. banks.

She said Citigroup's first-quarter write-down could total $13.12 billion, and that write-downs in the sector could top $50 billion.

"Many expected the fourth quarter to be the 'kitchen sink' for the industry," Whitney wrote in a separate report dated Thursday. "First-quarter results (will) be a rude awakening."

In October, Whitney correctly predicted that Citigroup would cut its dividend and raise $30 billion of capital. She expects more banks to seek new capital, with Citigroup "most needing of the swiftest and largest capital raise."

Whitney now expects Merrill to lose $3 per share in the first quarter, and tripled her projected write-down from $2 billion. She had previously forecast a profit of 45 cents per share. The analyst also cut her 2008 profit-per-share forecast to 20 cents from $4.

Analysts on average expected profit per share of 17 cents and $3.82 for the respective periods, Reuters Estimates said.

Whitney wrote that Merrill faces write-downs of $1.84 billion on collateralized debt obligations, $1.17 billion on below-prime "Alt-A" home loans, $950 million on leveraged loans to fund buyouts, $571 million on commercial mortgages and real estate, and $1.5 billion of other write-downs.