Writedown watch at Citi, Merrill
Brace yourself: Wall Street is looking at more writedowns. Adding to the growing chorus of analysts predicting more doom and gloom for Citi (C) and Merrill (MER) are Credit Suisse number crunchers. They took a back-of-the envelope approach in the wake of the E*Trade (ETFC)-Citadel transaction, which valued the struggling firm’s mortgage holdings at between 11 and 27 cents on the dollar. The Credit Suisse report says Merrill could be due for $9 billion worth of charges were it to mark its collateralized debt obligation holdings to market at levels dictated by the E*Trade deal, The Wall Street Journal reports. That pales, though, in comparison to Citi, which Credit Suisse says could face $26 billion in new markdowns.
To make matters worse, Moody’s is considering downgrading some structured investment vehicles, which will only add to pressure on bank sponsors such as Citi. Citi-backed SIVs holding $65 billion in debt were among those downgraded or put on review Friday by Moody’s, Bloomberg reports. The fourth quarter is certainly shaping up as another bruising one for the big banks.
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I like how ETRADE paid CITI back.