Further Writedowns expected for large-cap brokers in Q1

Goldman sees $1-$12 bln writedown for large-cap brokers in Q1

25 Feb 2008

(Reuters) - Goldman Sachs said it expects additional writedowns of about $1 billion to $12 billion each for several U.S. large-cap brokers in the first quarter, with Citigroup (C.N: Quote, Profile, Research) estimated to record the highest amount of about $12 billion.

Goldman expects these writedowns to be spread across residential mortgage-backed securities, commercial mortgage-backed securities and leveraged loans.

The combination of a slowing global economy and a continued correction in financial asset values will dampen 2008 earnings and returns for the investment banks, it said.

Goldman lowered its first-quarter and 2008 estimates for its large-cap universe which includes Bear Stearns (BSC.N: Quote, Profile, Research), Lehman (LEH.N: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research), JPMorgan Chase (JPM.N: Quote, Profile, Research) and Merrill Lynch (MER.N: Quote, Profile, Research) to reflect continued challenges in the credit markets.