6 Top Firms Said Likely To Writedown $27bn More In Q1

Goldman Sachs has come out and said that it expects six of the top US firms to report additional writedowns totalling some $27bn in the first-quarter. Goldman says that the writedowns will result from the falling values of mortaged-back securities and leveraged loans.

The Wall Street Journal quotes from Goldman research, which says ' although many of the writedowns in the back half of 2007 focused primarily on subprime and CDOs, we expect first-quarter 2008 writedowns to be spread across all aspects of residential mortgage-backed securities including subprime, Alt-A and prime, commercial mortgage-backed securities and leveraged loans'. The firm is forecasting the following first-quarter writedowns:

Citi - $12bn

Merrill Lynch - $4bn

Lehman Brothers - $3.5bn

JPMorgan Chase - $3.4bn

Morgan Stanley - $3.1bn

Bear Stearns - $1.4bn

In the meantime, Oppenheimer analyst Whitney Meredith is saying that, in her view, first-quarter writedowns may well push Citi into a loss of some $1.6bn (far less, however, than the $9.8bn loss posted in the fourth-quarter).

Whilst Bloomberg reports that Merrill Lynch analyst Guy Moszkowski has cuts his first-quarter earnings estimate on Goldman, saying: 'Based on recent market movements, we are trimming our first-quarter forecast. Market action in February has been such that we need to take another look'. The news agency also reports that, according bond research firm CreditSights, Goldman may well be looking at incurring losses of some $11.1bn from assets held in VIEs, variable interest entities which allow firms to maintain assets like subprime-mortgage securities off their balance sheets. Concerns are now growing that losses from VIE assets could be the next shoe to drop, which may result in another $88bn in losses from banks playing the debt-backed securities game.