July 8, 2008 / 11:51 AM / in 12 years

UPDATE 2-Merrill may write down $5 bln in Q2 - Wachovia analyst

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July 8 (Reuters) - Merrill Lynch & Co MER.N may write down about $5 billion in the second quarter, said a Wachovia Capital Markets analyst, who expects the No. 3 Wall Street investment bank to post a loss in the quarter and full year.

Analyst Douglas Sipkin said Merrill may be in need of another capital infusion, adding that the potential for additional writedowns following recent results should weigh on Merrill’s multiple in the near term.

Several Wall Street analysts expect Merrill to incur huge writedowns and have raised concerns about the investment bank’s capital position. Merrill is expected to post its fourth straight quarterly loss when it reports its second-quarter earnings next week.

Merrill is moving closer to selling stakes in financial firm BlackRock Inc (BLK.N) and information provider Bloomberg LP in an effort to raise cash to make up for $6 billion in coming writedowns, the Wall Street Journal said Monday citing people familiar with the matter.

Asset sales in BlackRock and Bloomberg are not a good sign since these positions are one of the few remaining positive elements for the bank, Sipkin wrote in a note to clients.

He, however, said that he views the Bloomberg position to be a better candidate for sale.

Sipkin reversed his second-quarter estimate for Merrill to a loss of $2.16 a share from his prior profit view of 63 cents. He also forecast a loss of $3.11 a share for 2008, down from his previous profit estimate of 15 cents.

Merrill’s banking business should show weakness due to asset writedowns and declining merger and acquisition activity, but its retail business is expected to report solid results as transaction volumes hold steady, Sipkin said.

Merrill shares were trading almost flat at $30.33 in late morning trade on the New York Stock Exchange. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Himani Sarkar)

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