Concerns Grow Over More Citi And UBS Write-Downs
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Citi shares have now fallen to their lowest level for almost a decade after Merrill Lynch analyst Guy Moszkowski said that Citi might be looking at writing down another $18bn in the first quarter (up to $15bn related to subprime lending and CDOs). In the meantime, rumours swept the markets earlier this week that Citi is looking to cut an additional 30,000 heads to rein in costs.
And Bloomberg reports that the markets are abuzz with rumours that UBS has got rid of $24bn of holdings backed by Alt-A mortgages in a 'fire sale', prompting JPMorgan analysts to increase their estimates of first-quarter asset write-downs to $17.8bn. Some say that PIMCO is likely to have been a major buyer of the assets. Reuters quotes from a Morgan Stanley research note, which says that 'UBS may choose to sell down its workout book of mortgages, taking larger upfront losses to reduce uncertainty on capital ratios'. UBS shares were hitting 5-year lows Thursday morning.
And finally, Merrill Lynch probably isn't totally out of the woods yet either. Although CEO John Thain was said that the firm has no need for further injections of outside capital (and the firm has been very conservative in its write-downs so far), there's likely to be some 'kitchen-sinking' in the first-quarter as the firm's cleans house.
