UPDATE 1-RESEARCH ALERT-Oppenheimer slashes US broker estimates

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NEW YORK, Feb 12 (Reuters) - Oppenheimer & Co analyst Meredith Whitney, who last year correctly said Citigroup Inc (C.N: Quote, Profile, Research) would cut its dividend, on Tuesday said she cut her first-quarter profit estimates for major Wall Street banks about 40 percent, citing a "sudden and material decline in levered loan valuations."

Whitney also downgraded Morgan Stanley (MS.N: Quote, Profile, Research), one of the banks, to "perform" from "outperform."

In a research report, the analyst wrote that banks and brokerages she covers have nearly $200 billion of leveraged loan commitments, and that these will lead to $10 billion to $14 billion of write-downs.

She cut her profit per share forecasts 15 percent to $1.90 from $2.25 at Bear Stearns Cos BSC.N, 33 percent to $2.70 from $4.00 at Goldman Sachs Group Inc (GS.N: Quote, Profile, Research), 33 percent to $1.00 from $1.50 at Lehman Brothers Holdings Inc LEH.N, 51 percent to 45 cents from 92 cents at Merrill Lynch & Co (MER.N: Quote, Profile, Research), and 56 percent to 65 cents from $1.47 at Morgan Stanley.

"On top of an already moribund quarter for the capital markets activity, we now expect brokers to report first-quarter results which we expect will be worse than former trough levels of the 2002-2003 cycle," she wrote. "Results will likely be worse than those seen in well over a decade and will surely be worse than even the lowest of the existing current estimates."

Whitney rates Lehman "outperform," Bear Stearns and Goldman Sachs "perform," and Merrill Lynch "underperform."

Last Oct 31, Whitney, who worked at CIBC World Markets at the time, said Citigroup might need to raise more than $30 billion of capital, perhaps in part through a dividend cut, as losses mounted from a variety of complex debt.

The bank later cut its dividend 41 percent and said it raised about $30 billion of capital over two months. (Reporting by Jonathan Stempel; Additional reporting by Sweta Singh in Bangalore; Editing by Pratish Narayanan and Gunna Dickson)