Merrill Lynch and Citigroup steeled for further writedowns

by Gill Montia

Story link: Merrill Lynch and Citigroup steeled for further writedowns

Wall Street investment banks, Merrill Lynch and Citigroup, both expect to see their first-quarter profits decline as a result of losses on mortgage-related assets.

Citigroup expects to write down $12 billion in the first three months of 2008, which will be in addition to the $18 billion written down in the fourth-quarter of 2007.

Merrill Lynch is expected to write down $2 billion in the first-quarter, following on from the $16 billion already written-off by the bank since the start of the sub-prime mortgage crisis.

The predictions would bring the total loss to the global banking industry from sub-prime related assets to around $210 billion and both banks may need to raise further capital to boost their balance sheets.

In related news, Swiss investment bank UBS, today confirmed that it plans to raise £7.57 billion in a rights issue.

The bank wrote down $19 billion in the first quarter of 2008 and has lost its chairman, Marcel Ospel, who resigned this morning, saying: “I have always stated that I ultimately take responsibility for the bank’s situation.”