The first quarter should be another brutal right of passage for big investment banks. Citigroup is forecasting that they will have to write-down another $9 billion in Q1. According to Reuters the damage will be "primarily driven by additional leveraged loan and mortgage-related losses."
Among the hardest hit firms will be Goldman Sachs (NYSE: GS) which is facing as much as a $3.2 billion write-off, Merrill Lynch (NYSE: MER) which may post $2.9 billion in write-downs, and Morgan Stanley (NYSE: MS) where the figure could be as high as $1.2 billion.
If the numbers are correct, it may open the door for another round of raising funds for the brokerages. Now that most of them have called on sovereign banks overseas, it will be essential that US private equity firms or Treasury help them out of the mounting mess. In all probability, existing shareholders will be diluted driving the share prices of the firms down again,
Douglas A. McIntyre